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How can automakers make money from mobility?

It is unclear as to whether MaaS is the right play for automakers, but partnerships and could help to ensure such services are utilised. By Freddie Holmes

Mobility as a Service (MaaS) has proven a tough beat for automakers so far. The challenge was once getting prospective buyers to put pen to paper on a new car; vehicle manufacturers are now tasked with putting bums on seats as part of shared mobility services.

A handful of major services have either been scaled back or closed altogether, and partnerships between dire enemies suggest that MaaS should not be tackled alone; the mammoth tie up between BMW and Daimler would indicate that partnerships could be key to the survival of such operations. This article will not include the glorified leasing programmes run by many automakers, including the reincarnated Cadillac Book ‘subscription service’ that allows members to rent a suite of vehicles for a fee of around US$1,500 per month.

From a universal mobility perspective, the question remains: how can automakers soothe the teething pains that have been felt in establishing mobility businesses, and ensure those lofty investments bring sizable returns?

The wheels fall off Ford’s Chariot

One of the largest scalps to date has been Chariot, a private bus company acquired by Ford in 2016 for US$65m. It spearheaded the brand’s push to become not only an automaker, but also a mobility provider.

In January 2019, it was announced that the business would cease operations, with Chariot’s Chief Executive, Dan Grossman, noting that the service had proven ‘unsustainable’. The brand withdrew from ten US cities, as well as London, its only venture outside of the US. It came as a surprise; in May 2018, Marcy Klevorn, President of Mobility at Ford Motor Company, noted she was “very confident about having the funding that we need to continue to progress and scale these businesses.”

Micro-transit is a challenging space, and there have been multiple companies that have arisen and folded while others continue on

Modified transit vans with space for 14 passengers would operate on a fixed route, with riders able to reserve a spot via a smartphone app. Utilisation was patchy. One line in Denver reportedly served just 100 riders over the course of two and a half months—a service that the city had subsidised for US$250,000 to give locals free rides for six months. Part of the problem was that for many, a city bus was cheaper, served more routes and had safer drop-off points.

“Micro-transit is a challenging space, and there have been multiple companies that have arisen and folded while others continue on,” Jessica Robinson, Executive Director of the Michigan Mobility Institute, told M:bility. Having previously worked at Ford’s Smart Mobility unit, Robinson believes success in this space will boil down to strategy and execution. “Chariot operated on a quasi-fixed route with stops met by passengers that click on the app, but the maths is really hard in terms of creating an efficient route with an optimised number of people,” she explained.

Maven scales back

In January 2016, General Motors launched a dedicated mobility service under the separate brand of Maven. Through a smartphone, users could access an empty Maven vehicle and pay by the hour before returning it to a designated spot. It also runs a peer-to-peer programme in which owners can rent their cars out when not in use. Maven was pegged as the Detroit automaker’s first real foray into the hazy world of MaaS, an entry point for electric vehicle (EV) adoption and in the long run, a foundation for shared robo-taxis being developed with Cruise Automation.

However, in May 2019 it was announced that Maven would shutter in several key cities as part of a ‘strategy shift.’ With demand dwindling in some (as yet unspecified) locations, operations are being slimmed down to focus on where demand is highest. Both the traditional car-sharing services and Maven Gig—which primarily serves delivery drivers as part of the ‘gig economy’—will be scaled back, according to an initial report by the Wall Street Journal. In total, services in eight of its 17 North American cities are reported to be closing.

The news was unexpected. Maven’s user base appeared to be expanding: in November 2018, GM forecasted that Maven would hit 300,000 members in 2019—up from its 200,000 members at the time. It had garnered a reputation as being ‘the AirBnB for cars’, and there were even suggestions of an IPO in future. In January 2019, GM’s head of Maven and Urban Mobility, Julia Steyn, left the company.

The maths is really hard in terms of creating an efficient route with an optimised number of people

Finding a niche

Targeting users that already have access to affordable and convenient forms of transportation may not be the best approach. In contrast, those with limited access to mobility may find the launch of a new service—which caters to their specific needs—extremely appealing. Does MaaS need to find a niche within a niche?

While Chariot got the chop, Ford’s other mobility ventures appear to remain in the picture. GoRide Health, the automaker’s non-emergency private ambulance service, is being expanded, and is targeting ‘thousands’ of rides daily, across six cities, by the end of 2019. In 2020, the service will grow to include states such as North Carolina, Louisiana, Texas and California.

Others in the mobility game have launched similar services. In November 2018, Lyft hired its first Vice President of Healthcare to “reduce the healthcare transportation gap.” According to Lyft’s 2019 economic impact report, nearly a third of riders surveyed had used the app for non-emergency medical transportation. Uber has also introduced a healthcare-focused ride-sharing service. In June it announced partnerships with Carisk and Pack Health to help injured workers and those with chronic illnesses to make medical appointments. Dan Trigub, Head of Uber Health, describes the business as an “easy, on-demand way for patients to get the care they need whenever they need it most.”

Share Now: a brand and a strategy

While a mammoth deal in its own right, the merger between BMW and Daimler’s mobility units may illustrate the importance of collaboration. “The development of ‘frenemies’ is way more than just a way to survive,” observed Axel Schmidt, Managing Director and Global Automotive Lead at Accenture. “In every industry there are windows of opportunity, but they are getting smaller and smaller. You can either take this chance on your own—assuming you are strong enough—or team up with someone.”

While Chariot got the chop, Ford’s other mobility ventures appear to remain in the picture. GoRide Health, the automaker’s non-emergency private ambulance service, is being expanded

To the disappointment of many industry watchers, the joint venture did not come under the name of ‘Jurbey’ as expected, and instead created five separate services, including Reach Now (car-sharing), Share Now (free-floating car-sharing) and Free Now (ride-hailing and chauffeur services). In doing so, the pair had created a ‘game changer’, according to BMW Chief Executive Harald Krüger.

“In recent years, we have evolved from a manufacturer to a mobility provider,” he told analysts in March. “Going forward, we aim to be a leading tech company for premium mobility.” In April, Daimler’s Chief Financial Officer, Bodo Uebbe, advised that joining forces with BMW had created a “global player” in sustainable mobility services, and cited a prospective customer base of around 66 million users worldwide.

“To realise the full potential of such a partnership, the partner should offer complementary abilities or, even better, a similar mobility service,” said Accenture’s Schmidt. “This is critical, given the fact that the future of mobility will serve customers who use different vehicles whenever and wherever they need them. Therefore, automakers must become brokers of mobility, rather than just car manufacturers.”

Why MaaS?

Mobility is clearly an attractive venture for automakers, but it is also a gamble. With hefty upfront investment come the additional fees associated with keeping fleets of cars clean and mechanically sound. Failure to comply with state and federal roadside inspections could lead to fines—or the service being hauled off the road. While press releases would indicate automakers are moving toward MaaS with glee, it is a shift that has been forced upon them from outside disruptors.

The development of ‘frenemies’ is way more than just a way to survive

“Carmakers feel they need to get into the area of MaaS because their traditional business model of producing cars to sell to individuals is being disrupted by ride-sharing and other alternatives,” said Anna-Marie Baisden, Head of Autos, Macro Research at Fitch Solutions. “It is out of their natural area of expertise though, so as well as factors such as ensuring there is demand—do they have the right demographic in their target markets, is public transport good enough to provide competition—they also have to look at new types of operational cost.”

Baisden believes rental firms with greater experience in managing fleets of shared vehicles will become necessary to ensure the service is looked after. It is not an easy job; the Paris-based EV car-share scheme Autolib was axed following chronic under-utilisation and tales of cars being left with soiled interiors and smashed windows. “Waymo has already made this move by partnering with Avis because it appreciates it doesn’t have that experience,” Baisden noted. “We could see carmakers going down the same route as they get more experience of what is required.”

Settle in for a bumpy ride

Moving forward, automakers turned MaaS operators will need to carefully consider how their services integrate within existing transportation networks. If the service follows a similar route to a public bus, the chance of attracting and retaining new riders is slim. In contrast, catering to those that may have limited access to mobility could prove to be a profitable niche.

Automakers must become brokers of mobility, rather than just car manufacturers

So far, automaker-led MaaS services have largely struggled to tear consumers away from their cars or lure them from buses and trains. But for those that have long been unable to use either, new mobility services could prove attractive and lead to sustained demand. One thing is clear: if investments do not start to bring returns, automakers’ visions of shared mobility could come and go in a flash.

This article appeared in the Q4 2019 issue of M:bility | Magazine. Follow this link to download the full issue.

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