Navigant Research Blog

The Need to Balance Ride-Hailing Costs and Benefits

— April 26, 2018

People who frequently use ride-hailing and carsharing services enjoy the flexibility and freedom that comes from operating or owning a car. Others complain about the perceived shift back to personal car use from public transit and increases in traffic congestion.

Perspectives from Texas

Case in point is the city of Austin, Texas, where Uber and Lyft have returned after a 2-year hiatus. According to Automotive News, not everyone in the city was happy to see the services return, with some residents miffed about the increasing congestion. Adding to the fray in Austin is General Motors, which recently brought in a fleet of all-electric Chevrolet Bolts via its Maven Gig rental program. The Bolts are offered to people without a car who want to work for the ride-hailing and delivery services, with drivers paying weekly rental fees. The Bolts provide the benefits of zero-emissions driving, but still add to the number of vehicles on city streets.

Austin was rated as one of the 26 best US cities to be an Uber driver based on analysis of earnings per trip. All of these cities will likely see more ride-hailing traffic in the coming years. According to Navigant Research’s Mobility as a Service report, the number of drivers working for ride-hailing services in North America will grow by 20% annually and surpass 5 million in 2026. The benefits and costs of these services to the cities where they operate will continue to generate debate.

Are Millennials Killing the Personal Vehicle, Too?

There have been several studies on the impact of ride-hailing, including analysis by the Institute of Transportation Studies at the University of California, Davis. According to a recent report, ride-hailing customers report using public buses, light rail, and bicycles less, but actually walked and took trains more. While traffic may be increasing, parking is getting easier as people are parking at destinations less, and many cities are seeing declining rates in car ownership. According to UC Davis data, 9% of millennials who use ride-hailing services disposed of one vehicle in their household, and others have delayed car ownership. As the frequency of using ride-hailing services increases, the likelihood of giving up a car rises, while vehicle miles traveled in personally owned vehicles declines.

Sharing Services Continue to Gain Popularity

Between 2010 and 2015, several of the largest US cities saw declines in vehicle ownership among millennials, including Seattle, Detroit, Washington, DC, New York, and San Francisco. The decreases in vehicle ownership are likely to continue as ride-hailing and carsharing services rise in the coming years.

There are positive repercussions for urban land use with the reduction of vehicle ownership and personally owned vehicle trips. Eliminating parking spots in the urban core frees up spaces for greening cities and other uses that are more aesthetically pleasing than parking. Reduced vehicle ownership will make more spots available in residential areas for those drivers who retain their cars.

Economic Benefits

Ride-hailing services also are good for the economy as customers can freely travel to areas with limited parking, stay out later, and indulge in drinking alcohol knowing that a safe, reliable ride is available in minutes. A recent study from the University of Pennsylvania found a correlation between the presence of Uber and reductions in drunk driving, a safety benefit for all. Another benefit is less costly transportation access for an aging population and people with disabilities. Uber recently announced the UberHealth service, which enables caregivers to book appointments for patients.

Ride-hailing should not be left unchecked to create more traffic problems and reduce use of public transit. That said, the benefits of ride-hailing services for customers and local economies are real.

 

Sharing Companies Shouldn’t Get Free Rides

— February 6, 2018

One of the big themes of recent years has been the emergence of the so-called “sharing” economy. Unless we were raised by hardcore Ayn Rand acolytes, chances are that as children we were taught that sharing is good, and I certainly subscribe to that philosophy. However, the kind of sharing I learned was about splitting cookies or letting other kids play with my toys. It wasn’t about business, it was for free in an altruistic manner. What we increasingly experience today is a freelance gig economy that has little to do with that kind of sharing, and has everything to do with commerce.

The Capitalism of Sharing

Why is this relevant? Many of the shared economy startups claim to be enablers of sharing when in fact they are independent business enablers. Not that there’s anything wrong with that, but we need to recognize these companies and their products for what they are and treat them accordingly from a policy standpoint.

Instagram is, or at least was before it was taken over by “paid influencers,” a place for users to share photos with friends. Uber and Lyft are platforms that enable freelance taxi drivers to give rides to strangers for pay. AirBnB is a platform to let people rent rooms, apartments, or houses to strangers for pay. Turo is a platform that lets individuals try to become Hertz by making their cars available to rent.

Dictionary definitions of sharing don’t rule out commerce since we buy fractions of companies and other products and call them shares. But the messaging from these companies always seems to focus on sharing in the altruistic context. This framing of the message is often used as part of the argument for circumventing regulations that govern the traditional form of the industries these new businesses are trying to compete with.

Safety in Sharing?

While there are undoubtedly plenty of rules in the taxi, hospitality, and rental businesses that are outdated and in many cases simply protectionist for incumbents, there are others that provide a public good. Background checks for taxi and livery drivers aren’t a terrible idea when it comes to public safety. Ensuring that homes being rented out to travelers meet building safety codes is ultimately a good thing. Managing where people pick up rental cars or hail rides at airports or in cities is crucial to safe and efficient operation for everyone. Yet some upstarts seem to think they get a free ride from regulations by playing the sharing card.

In late January 2018, Turo was in a dispute with the City of San Francisco about permitting at the San Francisco International Airport. The rules are meant to help pay for upkeep of the airport and manage traffic congestion. Turo claims it is not a rental company on the basis of it not owning or renting the physical assets, similar to the arguments made by Uber, Airbnb, and others. While the operational details differ from incumbent to incumbent, the end result to the customer is effectively the same as with those established players. They make reservations and payments using the startups portal, pick up their rental, and drive.

Compliance with reasonable business rules will be increasingly important as we transition to automated mobility services. Navigant Research’s report, Market Data: Automated Driving Vehicles, anticipates nearly 5 million such vehicles being deployed by 2025. If cities cannot manage where they go, congestion is likely to get worse rather than improve. We need to find a cooperative balance between overregulation and being completely laissez faire if we are to solve our transportation problems.

 

Preludes to Premium Mobility Services

— May 22, 2017

Moving toward a world where individual vehicle ownership gives way to automated mobility services, automakers and service providers run the risk that their differentiated products will become commodities. In an industry that already runs relatively thin margins on top of high capital costs, the thought of becoming a commodity is a nightmare scenario. That is why companies like Ford and General Motors (GM) are experimenting with models that could feature different price points and margins.

Differentiation Necessary

If you use one of today’s basic ride-hailing services, it doesn’t matter if you use Lyft, Uber, Gett, or one of the numerous small services that operate regionally. Using luxury tiers like Uber Black gets users a premium vehicle, but otherwise the service is essentially the same and the prices are usually close. In order to charge a premium price that can generate the profits needed to sustain a business, companies will have to find ways to differentiate.

In a world where the car you ride in becomes random, the overall customer experience of the service will become crucial. That may include being able to specify what type of vehicle you want, guaranteed shorter wait times, access to added services like picking up the dry cleaning or groceries, and more.

In January 2017, GM’s Cadillac division launched Book, a service that enables customers to pay a flat monthly fee and get access to any of the vehicles in the brand’s model lineup. A subscriber may opt to spend the week commuting in an XT5 crossover, switch to an ATS-V performance coupe for a weekend jaunt in the country, or get an Escalade for a family road trip. Cadillac takes care of insurance, detailing, and maintenance.

At the New York Auto Show in April 2017, Lincoln announced its Chauffeur service. As the name implies, Lincoln provides its customers with access to a professional driver when owners cannot or don’t want to drive—such as on a special date night or to pick up the kids from an event. Lincoln screens the drivers and they arrive at the customer’s location on request to drive the customer’s car. Lincoln Chauffeur debuted in Miami and is now expanding to San Diego.

An Automated Future

Hypothetically, 5 to 10 years from now when both of these brands (and others) are offering a range of automated vehicles, it’s easy to imagine a scenario where services evolve to take advantage of that automation. The Cadillac of your choice appears at your doorstep on demand; for certain models like the high performance V series, GM can offer the option for the customer to drive if they choose while others may be automated only. Similarly, Lincoln Chauffeur could be utilized with automation for vehicles that customers buy, lease, or subscribe to on a weekly, monthly, or annual basis. Tesla CEO Elon Musk has also articulated a vision where his customers could make their vehicles available for short-term rentals when not being used.

These and other varieties of services will mean dramatic changes for the automotive retail business, as well the automakers and customers. The choice of whether to lease or buy gets expanded into additional types of payment plans, including by the mile, hour, month, and more. The possibilities will be limitless for affluent customers. For example, a customer may not need to decide what color car they want in their garage; they can order one coordinated to their outfit for the evening. No doubt there will be many more experiments from automakers over the next several years as they seek to navigate their way through a changing transportation landscape.

 

Carshare Services Gear Up for Gig Economy

— May 5, 2017

Younger urban dwellers are increasingly joining the ranks of carsharing, ride-hailing, and delivery service workers, as more and more companies are customizing their offerings for participants in the new gig economy. Driving jobs that offer flexible hours and attract predominantly younger drivers are known as “gigs.” Carshare companies see renting out their vehicles to these independent drivers as an opportunity to grow revenue and increase their brand awareness. Since Navigant Research expects revenue from carsharing programs in North America to surpass $1.1 billion annually by 2021, the combination of gigs and carsharing services represents a significant opportunity.

Maven Gig

Maven, a mobility company launched by General Motors (GM), announced partnerships on May 3 for its Gig program, which includes several services that simplify the process of renting vehicles for multiple services. With Maven’s mobile app, a rented vehicle can be used by drivers for Instacart, a grocery delivery service; GrubHub, a take-out food delivery service; and Roadie, which uses passenger vehicles to deliver packages. The rented vehicles can also be used by drivers for the ride-hailing companies that Maven has had relationships with, Uber and Lyft. Drivers can access their revenue, vehicle, and driving data for all services through one web portal and mobile application.

Maven will broaden exposure for GM’s Bolt battery EV by exclusively offering the car in its Gig program for rent for $229 per week. The program initially launched in San Diego and will include free charging at EVgo charging stations in the area. Drivers can save up to $100 per month in fuel when compared to driving a gasoline-powered vehicle, according to Rachel Bhattacharya, director of Commercial Mobility and AV Fleet Operations at GM.

Bhattacharya said having the vehicles available to drivers full-time enables them to work for multiple companies and switch tasks to match peaks in demand. For example, they can drive passengers during the morning rush hour and then deliver food at lunch and packages in the afternoon. After San Diego, Gig will be available in San Francisco later this year, and then in cities in other states, said Bhattacharya.

Promoting the Bolt is likely to boost EV awareness in areas where Maven Gig is available, as both drivers and passengers new to EVs will gain exposure to the capabilities of the vehicles. Bhattacharya said drivers receive in-person training on the differences in operating and charging vehicles, as well as information from both Chevrolet and Maven.

Maven City Carsharing

Maven City carsharing is available in 13 markets across the United States. In Denver, 200 Maven vehicles are available for rent, including the Chevrolet Volt plug-in hybrid. Lindsey Whiddon, general manager at Maven General Motors, said she is working with property managers to locate Maven rentals and charging infrastructure for the Volts close to the many new high rise apartments and condos in Denver. “Millennials have been quicker to adopt [carsharing],” said Whiddon, so she is prioritizing putting Maven vehicles close to highly dense areas where younger people may not have cars.

Carsharing and Gigs Not Just for Maven

Peer-to-peer carsharing company Getaround also recognizes this opportunity and is targeting freelance drivers via a partnership with Uber that allows vehicles to be rented for $5 per hour, including insurance, gas, and unlimited miles. The vehicles, which initially are available in San Francisco, are being provided by Xchange Leasing, Uber’s leasing program. Getaround also recently raised an additional $45 million in capital investment to continue expanding its carsharing service, which recently moved into the Tri-State New Jersey area. Maven has a similar deal with Lyft to provide GM vehicles to drivers through the Express Drive program.

 

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