By 2030, 60% of the world’s population will live in metropolitan areas, causing more traffic jams, pollution and energy use. Alex Kreetzer and Mark Thomas, Vice President of Marketing at RideCell, look at how ridesharing can be the most effective solution to these growing issues.

Staying ahead of the game in the automotive industry is becoming extremely difficult, especially when it comes to the mobility market. OEMs are struggling to compete with more flexible startups which are able to invest as much time as they want into pursuing new innovations such as ridesharing, so it is vital that these global automakers find a solution as soon as possible, before they are left behind. The need for owning a car is diminishing and we could soon see vehicle ownership completely disappearing over the next decade or two. Yes, this is rather far away, however there is no time to waste. It is so important that automakers remain flexible and prepared for changes in the market, in order to adapt and progress. But how can they do this?

This is where RideCell comes in. The San Francisco-based company provides a kick-start for automotive businesses in the new mobility market through a platform that allows customers to launch their own services. The businesses will change dramatically over the next 20 years, moving from private car ownership to subscription services, which means that they need to establish a direct customer relationship. This can be extremely difficult for larger automakers which are looking to disrupt their business models, so something like an end-to-end platform solution could simplify processes and revitalise out-of-date business models.

Speaking to RideCell’s VP of Marketing Mark Thomas, it is evident that OEMs will fall behind unless they utilise a platform for new mobility services and networks. “Unfortunately, developing a software as a service and direct customer facing service experience is not part of the OEM wheelhouse today,” he tells me, “which is why many customers are choosing to work with RideCell. We provide a turnkey platform for carsharing and ridesharing so automotive OEMs can enter the new mobility space without needing to create an entire platform of their own to power these new mobility networks.” Since its creation in 2009, Ridecell has acquired a global customer base, including BMW’s carsharing and ridesharing business, processing more than 15 million rides.

Embracing disruption

The hardest thing for most automakers is incorporating new ideas and processes into existing linear business frameworks. These OEMs are used to relying on selling vehicles, which is why so many are reluctant to take anything away from their profits. Although most of these OEMs may now realise that they must embrace this ‘positive disruption’, they still lack expertise in this field which means that they must look to collaborations and partnerships. “The automotive OEMs understand that their businesses will be disrupted, whether they embrace the coming change or not,” says Thomas. “There are a few who still ask why they should bother with starting a new mobility service, but those are few and far between. Those also tend to be the ones who are struggling with their traditional automotive sales business, so the thought of entering a new market with new business models is daunting.”

The adoption of technology and innovation has been suppressed up until recent years as management within top OEMs has focused exclusively on hardware which, to no surprise, saw the largest profit margins. Now times are changing; companies are starting to invest in new mobility solutions and are investing time into turning existing business models upside down. “I’ve worked at hardware companies where the software and services division of the company was starved for attention and budget because the revenue was being driven by hardware sales,” recaps Thomas. “Companies with a strong vision realise that they are not car companies but mobility companies. These are the companies that will make the strategic investment in learning, experimenting and embracing new mobility solutions and direct-to -consumer business models.”

The megatrends shaping the future 

Ridesharing and mobility providers have changed the perception of modern transportation. This new ideology will significantly affect the automotive industry from both a consumer and business perspective, as new megatrends transform automotive business. We have already seen the transition from taxis to mobility providers like Uber and this will eventually happen to personal vehicles as well. “Carsharing rose to prominence a dozen years ago and modern ridesharing services arrived five years ago,” explains Thomas. “Taxis existed for years serving business people and tourists but the advent of app-driven ridesharing services expanded the core customer base to urban dwellers looking for a more convenient way to get around.” Once the price of using a ridesharing service drops below the cost of owning a private vehicle, we will see the true potential of mobility services. The industry recognises that customers will be more attracted to mobility services rather than private vehicle ownership and this change will not be easy for companies to digest.

Over time, carsharing has developed into an advanced ecosystem that has benefitted both customers and providers. Carsharing previously required a rental base where cars had permanent parking spots, with customers having to return the vehicle to the same spot after use. Unsurprisingly, this is a problem for people who are not returning to the same area. Now, we see a new style of sharing emerging, which Thomas calls “free floating,” allowing one way trips. “These cars do not have dedicated parking spots and instead are used for trips where the car can be parked anywhere within the service zone. It’s a newer form of carsharing since cities need to create parking permits that allow cars to be parked in metered spots as well as controlled residential spots and have all the parking fees prepaid annually.” 

In the US for example, Seattle and Portland have embraced free floating and are selling permits for carsharing companies to ‘float’ within the city. Reach Now is powered by the RideCell platform and is the only service in the world that uses the same fleet of vehicles for carsharing, ridesharing and rentals. “Research shows that a fully deployed carsharing service can remove between 7 to 11 cars from the road leading to a less congested city. Municipalities will need to accommodate free floating carsharing services with permits that allow this business model. San Francisco, for instance, is still not offering licenses for free floating carsharing so it is only station-based in the area,” says Thomas. Overall, station-based carsharing is less efficient than free floating and, for the maximum profitability of new mobility services, it is a necessity to achieve higher vehicle utilisation rates.

The mobility revolution 

Although mobility as a service has been a disruptive industry trend and has increased convenience for many people, we still are some way off customers completely giving up their own vehicles. Currently, ridesharing is the most convenient solution, taking customers directly from where they are to where they want to go without the hassle of needing to find parking. However, Thomas explains to me that the biggest drawback of ridesharing today is how considerably more expensive it is than driving your own car because of the need to pay for a driver. This, of course, points to autonomous vehicles as a future solution. “The future changes the economics of ridesharing forever once the autonomous revolution intersects mobility as a service revolution. Once there’s no need to pay a driver, the cost of getting from A to B with a ridesharing service becomes less expensive than owning a car,” he says. Once this process becomes cheaper and more efficient than owning a vehicle, we will finally see a mobility revolution.

Most mobility leaders I speak to in the industry always seem to draw similarities from the fall of record stores and rise of subscription based music services. People switched from buying CDs in a shop to streaming music online, a service that is much easier and cheaper for customers. Thomas and I both agree that we will see the same transformation with car ownership, where customers will subscribe to a mobility service for a cheaper and more effective alternative to owning a vehicle. However, he does believe that many automakers have been too busy focusing on self driving cars and haven’t paid enough attention to the mobility service itself. “OEMs have been spending billions to create cars that drive themselves, yet they haven’t invested nearly as much creating the mobility service that directs these autonomous vehicles. RideCell is making the platform that will power autonomous fleets so that they know where to go, who to pick up, and how to maintain themselves.” At present, RideCell is the only company in the market that makes a platform for both carsharing and ridesharing, which will help its customers to combine elements of both solutions into an autonomous ride service platform. In order to move forward, automakers need to wake up and realise that, although the mobility revolution isn’t quite here yet, they must take action now to fully prepare for this drastic change.

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