Navigant Research Blog

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.

 

Autonomous Ride-Hailing May Hail the New Era of the Minivan

— December 22, 2016

CarsharingIt’s been more than 3 decades since Hal Sperlich and Lee Iacocca redefined the family hauler with the introduction of the minivan. Over the subsequent 20 years, the minivan segment grew to become one of the largest in the US market before being overtaken by SUVs and beginning a long and steady decline. However, as we move into the era of autonomous mobility services, we may also see a resurgence of what had been derided as the “soccer mom-mobile.”

While the minivan market isn’t as big as it once was in total sales volume, as these vehicles have gained useful amenities, they have become quite profitable. Starting in 2016, the companies that have stuck by this body style have begun introducing redesigned vans, including the 2017 Chrysler Pacifica and the 2018 Honda Odyssey that will debut at January’s North American International Auto Show in Detroit.

Vans On Demand

When Google decided it was time to expand its development fleet of self-driving cars, it struck a deal with Fiat Chrysler Automobiles (FCA) to purchase 100 Pacifica plug-in hybrid EVs (PHEVs) and equip them with its autonomous sensing and control systems. With the self-driving car project now spun out of the X research lab as a separate company called Waymo, it has also announced an agreement with Honda to discuss collaboration on development and possibly commercialization of autonomous technologies. In Navigant Research’s 2015 Autonomous Vehicle OEM Leaderboard Report, Honda was ranked eighth among 18 companies evaluated, so working with Waymo could provide a boost relative to the market leaders.

Since auto industry veteran John Krafcik came on board as CEO of what is now Waymo in October 2015, the program has apparently shifted its focus from developing complete cars to working with existing carmakers to supply its systems as well as potentially building mobility service platforms. As the shape of future mobility services continues to evolve, these platforms are likely to include a broad range of vehicle types to support different needs. One- or two-person pods may be adequate to provide first/last mile transportation in dense urban areas, while something more akin to a minivan can support families or larger groups traveling on a variety of routes that don’t have sufficient density to make mass transit viable.

Ford-owned San Francisco-based startup Chariot is already providing hybrid on-demand services in San Francisco and Austin, Texas with human-driven vans. As autonomous vans become available, they could be deployed in the same way. For these types of transportation services, the easier ingress/egress of a van would be much more practical than climbing up into an SUV.

Growing Trend

Volkswagen will also be joining in on the autonomous van trend at January’s Detroit show. The embattled German automaker will be unveiling a new battery electric micro-bus concept based on the same new modular electric platform that underpins the I.D. concept shown at this year’s Frankfurt Motor Show. FCA will be participating in the 2017 International CES in Las Vegas for the first time and will reportedly show a battery electric version of the Pacifica.

FCA’s program with Waymo only extended as far integrating autonomous hardware into the minivan and does not include system development. However, as one of the companies in the back half of the pack in the Leaderboard rankings, FCA would also be a good candidate to adopt a production autonomous package from Waymo or one of the larger Tier One suppliers such as Delphi or Continental. We’ll probably be seeing a lot more self-driving minivans in the coming decade.

 

Early Chevrolet Bolts in the Lyft Fleet Could Be Great Marketing Move

— August 16, 2016

Electric Vehicle 2For several months now, pre-production Chevrolet Bolt EVs have been rolling off General Motors’ (GM’s) Orion, Michigan assembly line, and the car is now only about 2 months from being ready for paying customers. However, many of the early Bolts won’t actually be going to retail customers. Instead, they will be offered up to Lyft drivers through the Express Drive rental program.

A Different Model

Given the way Tesla managed to rack up more than 373,000 pre-orders for its Model 3 at $1,000 each, one might wonder why GM isn’t taking a similar approach with the first affordable 200-mile electric car. Unlike the Silicon Valley upstart, GM cannot sell cars directly to consumers but must instead go through its franchised dealer network, so a similar pre-order process would be vastly more complicated, if not impossible.

Even if GM could execute such a program, it’s not at all clear it would work. Tesla and its CEO Elon Musk have built up a remarkable brand in less than a decade, and many of the pre-orders are coming from consumers that want to buy into that brand, just as they buy into Apple when they choose an iPhone over a comparable Android or Windows phone. For many very valid reasons, GM still isn’t taken seriously by many people when it comes to selling EVs, despite the positive reviews garnered by the Chevrolet Volt and Spark EVs.

GM does have a significant time advantage over Tesla and other automakers with the Bolt, and it appears to want to use that wisely with a different sort of marketing approach. Since modern plug-in EVs (PEVs) began hitting the streets 6 years ago, word of mouth and first-hand experience have proven to be very effective means of winning customers. When people actually experience a PEV, they are much more inclined to purchase one.

First-Hand Experience

Getting people to ride in Bolts with Lyft drivers has the potential to provide positive first-hand exposure without having to go to a dealer first. When a customer goes into a showroom having already decided they want to buy a Bolt, they are much more likely to get one. Unfortunately, up until now, many traditional car dealers have tended to steer customers away from EVs and toward more profitable vehicles that they understand better like utility vehicles and trucks. That’s exactly why Tesla insists on selling direct to consumers through company-owned stores, which is not an option for GM or other incumbent OEMs.

If GM can sell consumers on the Bolt before they ever get to the dealership, they may have a much better chance of early success. The mandates to sell zero-emissions vehicles in California and other states will start to ramp up significantly from 2018 onward and the competition will be getting much tougher with the debut of the Model 3; the next-generation Nissan LEAF; and 200-mile EVs from Ford, Hyundai, and others expected.

Navigant Research’s Electric Vehicle Market Forecasts projects global PEV sales of approximately 2.9 million in 2024 with 462,000 in the United States. Through the first 7 months of 2016, Americans have purchased almost 78,500 PEVs, an increase of 20% over the same period in 2015. While Tesla’s financial stability remains very much in question in the coming years as it rapidly scales its production volumes, the company has demonstrated that it is a force to be reckoned with among consumers. GM and the other incumbent OEMs will have to get creative with ideas like the Bolt/Lyft rental program if they are going to both comply with regulatory mandates and maintain or grow their overall sales.

 

Ride-Hailing Is a New Tool in the City Planning Toolkit, but Can It Be Managed?

— April 6, 2016

CarsharingstandortWashington, D.C. underwent an accidental experiment in new mobility in March when the city’s subway system shut down for 24 hours for safety inspections. Usually the Metro only closes down in bad weather, but the D.C. system is in a rough state (a subject that could itself be the topic of a weekly series of blogs). Though service interruptions are now the norm with the Metro, shutting down the entire system for a day came as a shock and was only compounded by the short notice given to riders.

Riders had an array of alternatives, most of which are not new: private cars, buses, bikes, and telecommuting. But one thing the shutdown confirmed is that on-demand mobility services have to be seen now as an established modal option in a multi-modal city transportation plan. On-demand services reported significant increases in business on the Wednesday that the Metro shut down. Zipcar had a 50% increase in reservations compared to a typical Wednesday morning, and Lyft reported a 65% increase in ridership. Since carsharing has been around much longer than ride-hailing—and because setting up carshare services requires parking permission from the city—it is already integrated into many cities’ transportation planning. To some degree, working with public officials is built into the carsharing business model.

Flexibility Is Key

Ride-hailing businesses have grown astronomically in a short amount of time, and city officials and regulators have yet to catch up. In addition, ride-hailing’s DNA is that of a Silicon Valley startup that works outside the conventional government/industry nexus. This has fed these services’ rapid growth and helps make them dynamic and flexible. Indeed, Uber and Lyft responded to the shutdown in ways you’d expect from flexible, market-based transportation services. There was a surge in supply, with Uber saying it had 50% more drivers available for service during the morning rush hour than on a typical Wednesday morning. The expected spike in rates charged to riders was muted thanks to this increase.

This flexibility is something that city planning and transportation agencies should take into consideration when evaluating how to prepare cities for spikes in travel demand. Ride hailing will be an important new tool for cities in transportation planning. Of course, cities don’t control this tool, which leads to tension between city officials and the ride hailing companies.

Cities are also legitimately wary that ride-hailing simply shifts travel back to single-passenger vehicles, worsening traffic congestion. The D.C. Metro shutdown also illustrated how that might look, with reports of massive congestion outside Union Station due to taxis and pickup services. However, if ride-hailing affects traffic significantly, it will increase the cost of using the service for riders and make options like public transit and bikes more attractive. Carsharing will be affected by this as well, even though it’s less likely that carsharing could drive an exodus from transit. A hopeful sign of how increased demand may alter the ride hailing market: Uber reports that 1 in 4 customers used UberPool, the carpool version of its service, on the day of the Metro shutdown.

If ride-hailing is now a part of the city’s mobility landscape, it is not likely to remain outside the conventional regulatory system. In our upcoming Transportation Outlook: 2025 to 2050 report, Navigant Research predicts that ride-hailing will become a much more regulated industry over the next 10 years. This will make it less nimble and innovative but will help services grow by ensuring that companies act as good citizens in the cities where they operate.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"Ride-Hailing","path":"\/tag\/ride-hailing","date":"12\/16\/2017"}