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Ride Hailing is Not Ride Sharing

Ride Hailing is Not Ride Sharing
by Roger C. Lanctot on 05-22-2016 at 12:00 pm

 There are many misconceptions about ride sharing as journalists and analysts are wont to refer to Uber, Lyft, DiDi and the rest. Conceived as a means to increase asset utilization by allowing drivers to pick up passengers along their way, ride sharing services instantly became ride hailing services directly competing with taxis and displacing the use of rental cars.

As services such as Uber and Lyft have grown, their founders and collaborating journalists and analysts foster claims that vehicle sales are being or will be negatively impacted. If these services were true to their names and indeed offered ride sharing it might be rational to expect a decline in vehicle sales, but the reality is that the displacement of taxis and rental cars has failed to stem the ascent of new vehicle sales.

In fact, the rise in new vehicle sales is especially impressive given the dual factors of millennials eschewing new car purchases (according to surveys and estimates by those same analysts and journalists) and new vehicles continuing to last longer and longer – now upwards of 11 years. In other words existing cars lasting longer and young people – mainly in urban areas – turning away from cars and driver’s licenses ought to be putting a damper on vehicle demand, but car sales keep growing.
It’s a sad but true reality. Cars resist displacement. You can make them more expensive to own, park and drive, and people keep buying them, parking them and driving them – ever more slowly as more and more cars clog streets all over the world.

There is something Malthusian afoot here. It is a well-known principle of traffic that we cannot build our way out of this mess of too many vehicles on the road. And we are fooling ourselves if we think Uber, Lyft and DiDi are going to dim demand.

But if so called ride sharing services actually represented ride sharing there might be some hope. The services that are or will have an impact on vehicle sales are those that focus on carpooling such as BlaBlaCar, Uberpool and Via, among others.

Cities, states and the Federal government in the U.S. – along with governments elsewhere in the world – are increasingly looking to commuters as a target for traffic consolidation. The latest rule making out of the U.S. Department of Transportation’s Federal Highway Administration is targeted at measuring travel times for commuters and truck drivers in the interest of establishing more reliable measures of congestion and emissions.

The heart of the matter is the predictability of the behavior patterns of commuter populations and the public interest served by helping commuters traveling along similar routes to more easily coordinate their transportation decisions. The data already exists regarding the most heavily traveled routes within cities. The goal now is to identify the most heavily traveled routes coming into and out of the city.
Via used historical limousine and taxi trip data in New York City to set up its true ride sharing proposition – multiple passengers at $5-$7/ride along predetermined routes. Multiple cities in the U.S. already have slug lines to help commuters take advantage of high-occupancy-vehicle (HOV) lanes into and out of major cities.

Carpooling – a.k.a. ride sharing – is the new frontier of congestion reduction. Critics have been lining up to castigate Apple for its $1B investment in DiDi in China noting that ride hailing services from DiDi to Uber are in a money-burning battle for market share. It’s not at all clear that billions of dollars in value will be realized at the other end of that bonfire.

But companies such as Via and BlaBlaCar that are actually able to get people to share vehicles – actually share rides – offer the twin advantages to municipalities of taking cars off the road and increasing human being throughput in existing cars on existing vehicle arteries. The only alternative strategy that even comes close is the growing number of departments of transportation that are looking at HOV lanes for self-driving cars capable of driving more closely together in so-called platoons.

Focusing on commuters has the added advantage of creating a concentrated target market for timely traffic information and advertising. Of course, a car full of commuters isn’t necessarily interested in listening to the same commercial message – but if those commuters aren’t doing the driving they can be reached individually on their mobile devices.

Transportation network companies focused on commuters have the potential to reduce vehicle demand and ease traffic congestion by increasing the utilization of vehicles already on the road. It will be a measure of car company commitment to change to see which car makers work toward investing in, partnering with or creating their own carpooling solutions.

Mercedes-Benz Research & Development has partnered with Via. Volvo has invested in RidePal. A car company investing in carpooling is courting its own irrelevance in a ride sharing future. Now that’s what I call taking a risk.

Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics. More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk

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