Some thoughts and projections about shared mobility
Last month, we were present at two different events featuring the same subject: mobility. Something stood out to us very clearly: the possibilities of great innovation and developing unprecedented technologies in this sector are in the hands of the startup ecosystem.
Why? Because of the initiative and the investment opportunities. Investors Event organized by the Connected Mobility Hub, taking place in Sevilla reminds us of the potential of new entrepreneurs, and the prospects for venture capital to empower new enterprises. Specifically, mobility is a fast growing and challenging sector that still has a lot of potentials to show.
Mobility is a subject to think about because of the challenges it implies for the future (which is something that has been considered by the Connected Mobily Hub). One of the main subjects was about the necessity of transforming mobility in a much more sustainable manner. This is related to the high level of traffic and contamination, with the goal of applying and developing AI and the creation of TaaS (Transport As A Service).
The technological revolution has undoubtedly had a massive effect on the way we move and transport. This truth about mobility was also stated at the ISDIgital Mobility talk in Barcelona on June 6th, where the ISDI organization presented a paper with interesting info. Among the data, they published that 35% of citizens in Madrid and Barcelona, the two biggest cities in Spain, already choose and hire digital urban mobility services. This is a medium, maybe a rather low rate, but it shows how far we can still go and all the improvements that mobility as a sector could still achieve.
All this combined with an increasing ecological attitude and a social change that considers shared models as a viable opportunity, are generating a whole new and innovative system of mobility possibilities.
We believe that four megatrends will shape the future of mobility:
- Automated driving
- Shared mobility services
- Electric mobility
It is important to consider the insights when it comes to developing a new mobility alternative. At the last ISDIgital conference in Barcelona, the need for a technological component in any form was presented. This is an obvious outcome of the tech revolution that mobility has to face. The need to pay attention to the ways users choose their transportation was also stated.
If we consider the four megatrends exposed before and focus on shared mobility, we would have to admit that people are moving from owning their own car to hiring mobility services. Lately, this has been a great opportunity for new projects and investments.
How does shared mobility affect the industry, the cities, other transportations and, policies and regulations?
Connected, Autonomous, Shared, and Electric (the four megatrends previously mentioned): Each of these has the power to turn our entire industry upside down. But the true revolution is in combining them in a comprehensive, seamless package.
Cloud mobility is changing how cities move: Not only ride-hailing, but many business model variants are vying for pre-eminence, such as shared mobility services.
Ride-hailing is set to overtake and ultimately eclipse taxi markets. It is currently 33% the size of today’s global taxi market, but could grow to $285 billion by 2030, ultimately outsizing the taxi market by 5.3 times.
Aggregator services will be the point of contact with the consumer, unless “Leagues” of vertical partnerships and/or acquisitions win the battle by offering a broad range of mobility options in the same platform.
Specifically about car-sharing, although it will expand relatively quickly and widely, it will have only a minimal effect on new car sales. This is because most drivers will not forgo car ownership entirely, and also because the shares of lost car sales will be partially offset by sales into car-sharing fleets in large urban areas.
Cities may not have traditional public transport. There may be potential for ride-hailing models in some form to play a role in the cities´ fundamental transport infrastructure.
The policies and regulations that local governments implement can have make-or-break impacts on the maturation of mobility innovations.
How to understand the tendencies within shared mobility? What are the opportunities?
Within shared mobility, we can identify the services that connect vehicles to passengers, and the initiatives that connect drivers to passengers. These two tendencies imply different consequences. If we focus on services that connect vehicles to passengers, we identify two options:
- Shared vehicles:
- Electric scooters
- Owned P2P
Car sharing has continuously seen double- digit growth over the last few years, especially in bigger cities where more and more people are passing on the costs of car ownership. While some of the most visible car sharing providers began in the United States, the sector has become a global phenomenon, and Europe now represents over 50% of the global car sharing market with 5.8m users and 68,000 cars in 2016.
Free Floating schemes entrance are becoming a revolution compared to traditional stationary based Car sharing. Now, additional models are arising such as Corporate Car sharing and Subscription Car Sharing models
Car sharing allows OEMs to ensure direct access to the end-customer and to provide a foothold in the new service- driven mobility area. Future business models of OEMs will move from being solely hardware suppliers to becoming solution providers. It will be those automotive trends and technological innovations, in particular electric cars and autonomous driving, with OEMs at the center, which will catapult the car sharing market from the current to the future state
About scootersharing, another growing trend, Spain, France and Germany are experimenting the increase of the options. This shared vehicle alternative has been growing and becoming very popular worlwide, it exploded in 2016. In numbers: Berlin and Paris are the epicenter of scootersharing activity with 41% of the scootersharing based in these two European capitals. Besides it has become really popular among young people. An interesting fact is that 79% of the 30 cities that have a scootersharing scheme are located in Europe, this can also mean a possibility of expanding the trend outside Europe generating new investment opportunities.
What about e-scooter sharing? This is a really new development, initiated last year in the United States and is gaining popularity and recognition, there is a clear chance that it might expand to Europe. It works with an app, a photo of a driving licence and a car, open the map and find the closer scooter. The scooters are dockless and can be left anywhere. The challenge: it needs for local admins to collaborate with shared mobility companies to develop a longer-term regulatory approach that enhances transportation options while protecting public safety and accessibility.”
Bike sharing is a settled trend, popular worlwide but needs to keep updated according to tech innovations. Some of the possible developments could be virtual stations, family bike sharing, reusable helmets, e-bike sharing, digitalization and partnerships among others. The success of future initiatives towards bikesharing will be considering the national and local governments, the sponsors and investors, the operating companies, the quality of the bike itself and and components manufacturers. Top players are concentrating their efforts in developing a net of bikesharing in Southeast Asia.
- OWNED P2P
As part of shared mobility we can also find the Owned P2P. What would make this model even better? The application of blockchain technology. Blockchain could improve operational efficiency in the near future, because its technology is a secured and trusted infrastructure (this would solve the trust issue between the parts) and the intermediary would no longer be needed. As well, blockchain technology allows the user to bring its own insurance that can be also securely verified.
But when it comes to connecting drivers to passengers we find two different business models: ride hailing and ride pooling.
Ride hailing is the most mature new mobility model, has a market of $282b, and counts with global players. Also is being generously stimulated by local regulations, city authorities see in ride hailing a way to regain the lost taxes from taxi income. 20 companies have raised $36b from venture and private capital but none of the new players have generated yet big impacts, our bet is that autonomous cars will enable important changes in ride hailing.
Ride pooling is a large market without a clear business model to unlock the market potential, specifically if we look at the market the players are not clear in traditional or digital forms, the big exception so far is BlaBla car for long distance trips. But, what about the opportunities? We identify basically three possibilities:
- Commute carpooling (i.e. short urban distances) will be the first mobility segment disrupted by autonomous vehicles
- Currently, private vehicles sit idle for 95% of the time. Waste of efficiency
- Carpooling is being included in other digital business ( Data companies , Micro-transit or Hailing)
Last but not least, we have the aggregators, they are a key piece in an increasingly connected world and where shared mobility options are highly chosen by users and clients. Aggregators work as the link with the consumer and this is the most important quality to have in mind when it comes to identify and boost new projects.
So shared mobility is shaping the future of transportations, not only in terms of shared vehicles but also when it comes to ride hailing and ride polling, this is something that matters both for local and foreign investors and entrepreneurs. We have some hints tell you about:
– Car sharing will have 35% of the total journeys by 2030
– Ride Hailing would have a €285bn market opportunity
– Ride polling: Bla Bla Car would achieve 40M annual rides
How all these developments are shaping our venture capital scenario?
This locates us in an interesting panorama where venture capital may have a great opportunity. The emergence of four trends, in particular, will lead to massive shifts in the business models of traditional automotive companies and open the door for other players who have, until recently, only been indirectly tied to the industry.
Overall, since 2010 significant investment activities have been made in new mobility technologies in more than 1,000 companies across the ten technology clusters nearly $111 billion in disclosed transactions. Surprisingly, less than a third of these relate to shared-mobility companies; the rest focus on the trends of automation and connectivity. Out of the $111 billion, more than 60 percent come from large investments with disclosed transaction values greater than $1 billion, and the rest from small investments.
However, one can learn much more from these smaller investments because they are related to smaller companies with special capabilities or technology. The large transactions, on the other hand, tend to be industry-shaping moves made aiming at established companies. Understanding small players and start-ups is crucial to efficient technology sourcing
The mobility sector is experiencing a strong increase in investment motivated in part by the large injection of capital from the large automotive manufacturers in startups. But the biggest investments come from technology companies outside the sector that have seen a juicy market in it like Google, Apple, Baidu, etc.
It’s also worth noting that the pace of overall investment is accelerating greatly: between the periods of 2010–13 and 2014–17, the average annual investment across all technologies jumped nearly sixfold, from $4.3 billion per year to $25.3 billion per year. Investments in 2017 to date are as large as the total between 2010 and 2014
About 2018 perspectives: The first weeks of 2018 have already caused a stir, as the total investments in Travel & Mobility Tech exceed $ 6.5 billion in 76 transactions until February 28. These previous reasons are more than enough to keep investing and increasing the possibilities for new projects that not only keep defying what we know but also have a deep interest in coming up with more sustainable mobility solutions.