What’s Next for Rideshare Operators, Shared Mobility, and the Sharing Economy?

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By James Hodgson | 3Q 2017 | IN-4643

The scale of Uber’s successes in recent years is impossible to deny; the US$70 billion company has built a truly global brand, revolutionizing personal transportation at a considerable pace. Its approach has been adopted by a long tail of smaller competitors in a number of regions. Uber’s dominance of the ridesharing market is demonstrated in the way that the brand has been “verbified”, with the term “uberization” referring to the transformation of an industry into a shared-economy services business model.

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Uber's Woes

NEWS


The scale of Uber’s successes in recent years is impossible to deny; the US$70 billion company has built a truly global brand, revolutionizing personal transportation at a considerable pace. Its approach has been adopted by a long tail of smaller competitors in a number of regions. Uber’s dominance of the ridesharing market is demonstrated in the way that the brand has been “verbified”, with the term “uberization” referring to the transformation of an industry into a shared-economy services business model.

It is therefore unsurprising that when Uber’s maverick CEO Travis Kalanick resigned following a protracted period of controversy, many commentators questioned whether this spelled the end of the Mobility as a Service (MaaS) trend. Setting aside the particular circumstances of Uber’s recent woes, it is certainly important to consider the challenges facing rideshare operators and whether or not an upheaval of the rideshare market could fatally impact the trend toward shared mobility services. 

The Crucial Difference between Shared Mobility and the Shared Economy

IMPACT


Uber’s current business model is typical for the shared economy, providing a framework to enable private individuals to share use of their assets (in this case, the use of passenger vehicles) in order to make more productive use of them. The ubiquitous smartphone serves as a platform to match buyers and sellers, facilitate easy payment, and route vehicles in the most efficient way possible. However, given that all vehicles in use today are manually controlled, contractors looking to use Uber’s service to share use of their vehicles also need to offer their services as driver. This represents the biggest barrier to growth for the rideshare operator, as it becomes increasingly difficult to source more drivers to meet demand, leading Uber to leverage dynamic pricing to encourage more drivers to participate and clear the market during peak periods.

There is no vendor more aware of the limitations of the driver/contractor model than Uber itself, which is why it has a dedicated autonomous driving group (Uber ADG), which already attempted (on a very small scale) to offer rides to consumers in driverless vehicles, albeit with a trained back-up driver. Removing the need for a driver will be the catalyst for an explosion in the adoption of shared mobility, as vehicles will be able to pilot themselves to users, take them to their destination, and then continue on to the next customer—a comparable experience to taking an Uber for the consumer, but without the added friction of finding, matching, and hiring a driver. These vehicles could be owned by private individuals and loaned out on a peer-to-peer basis with the help of an integrator like Uber, but they could just as (if not more) likely be operated by a specialized fleet provider.

Therefore, even if problems around driver participation limit the growth of the shared economy in personal mobility, it by no means spells disaster for driverless shared mobility services.

The Big Pain Point for Rideshare Operators

COMMENTARY


At the center of the Venn diagram between Shared Driverless Mobility and The Shared Economy lies the P2P business model described above. The question remains however, as to why consumers would wish to own expensive driverless vehicles if they are able to simply make cheaper use of another’s, particularly when a number of vendors, most recently Renault-Nissan, have committed themselves to operating driverless fleets for use as a service.

In many ways, rideshare operators like Uber already possess many of the competencies necessary to successfully adopt this business model—a strong global brand, a well-honed app and user interface, integrated payment, and strong experience in demand-response. However, in one key respect, the B2C driverless fleet model represents a serious upheaval to rideshare operators—it means actually owning the vehicles that provide the mobility service. Removing the driver from the equation represents a significant cost saving, but the basic fleet management capabilities of maintenance, life-cycle management, and uptime maximization are as foreign to rideshare operators as they are to original equipment manufacturers (OEMs). This competency-gap represents a perfect opportunity for OEMs to exploit, as developing these core fleet management abilities will enable them to regain some of the shared mobility market share that they have all but lost to the large rideshare operators. 

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