By adaptive - February 27th, 2017
With technology and demographics making the future of auto sales murky, BMW moves into ride sharing. Can a carmaker morph into a mobile platform provider? Susan Kuchinskas investigates.
Ride-hailing services including Lyft and Uber have taken big bites out of the taxi business in cities where they operate. As early as 2014, the San Francisco Municipal Transportation Agency said the average number of trips per taxi had dropped by nearly two thirds – and that's before the San Francisco airport was allowing ride-hailing companies to pick up passengers there.
At the same time, many pundits proclaim that millennials don't – and won't – want to own a car. While there isn't clear data supporting that claim, it's certainly true that our love affair with car ownership may be changing, while there are ever more options for on-demand transportation. Meanwhile, the eventual availability of self-driving cars could further change the equation.
Automakers are all grappling with their place in this still-evolving marketplace; they're all investigating the role they might play in so-called mobility services, a catchall term that includes ride-sharing, car-sharing, ride-hailing and public transportation.
BMW is farthest along, thanks to the launch of a multimodal service called ReachNow that comprises four services running on a mobile platform.
Multimodal
In November 2016, BMW announced four mobility services: Ride, Share, Reserve and Fleet Solutions. Between them, they answer a variety of transportation demands while giving consumers the opportunity to experience that BMW ride.
· Ride is a ride-hailing service that launched as a pilot in Seattle in December. Drivers provide rides in ReachNow-owned vehicles rather than in their personal cars.
· Share is a peer-to-peer car-sharing piloting in Seattle that lets MINI owners rent their cars to others when they're not using them via the ReachNow app.
· Reserve will let people schedule a fleet vehicle to be delivered to them for trips lasting from two to five days.
· Fleet Solutions provides fleets of Series 3 and BMW i3 electric cars to apartment and condominium complexes, allowing residents to use them for round trips. The service went live in December at The Solaire in Battery Park City, Manhattan.
"Our ultimate goal is to have an ecosystem comprising all these services," says Simon Broesamle, COO of ReachNow. "We want to operate in cities that know we are part of the solution and that have some policies in place to embrace car sharing."
In addition, ReachNow looks at market factors including population density and a populace that enjoys innovation and is willing to use mobile, on-demand services. Broesamle adds, "If our competition is already there, that's good."
Piloted learning
This isn't BMW's first ride-sharing rodeo. It's operated the DriveNow service in Europe for the past six years. DriveNow is a free-floating car-sharing service that lets people pick up and leave cars in locations that are convenient to them, rather than having to return them to a specified lot.
BMW brought DriveNow electric cars to a San Francisco pilot in 2012. It shut down the service in 2015, due to a lack of enough parking spaces.
"We didn't have the regulatory permits to do free-floating car sharing," Broesamle recalls. "That was a big learning, that we should always make sure regulatory was in place."
The other goal for the ReachNow launch was to improve the mobile experience while creating a platform that would support different business models. The company worked with RideCell, provider of white-label platforms for mobility services, to get up and running.
Mike Cottle, RideCell's chief customer officer, says mobility pilots can help automakers understand consumer behavior, acquire data about usage and learn how to transition from a manufacturing-based business to a service-based one.
"Much in the same way they would invest in R&D and spend billions on new vehicle models or new technology, they should be investing in these new concepts, even though they may not reap rewards for a while," Cottle says.
For example, RideCell has found that car-sharing services are most used during the day and on weekends, while ride hailing is more popular during commute hours and at night.
After a couple months of operation, ReachNow will be able to balance demand among the different services, for example, by moving cars to a different part of the city ahead of peak demand or creating incentives for drivers when ride-hailing demand is high.
Competition
Navigant Research estimates that global car-sharing revenue will climb to $6.5 billion by 2024, up from $1.1 billion in 2015. However, that number includes ride hailing, which is likely to dominate.
Lisa Jerram, principal research analyst contributing to Navigant Research’s Transportation practice, thinks the market will trend toward the ride-hailing model. "Peer-to-peer seems less broadly popular," she says.
ReachNow's Broesamle thinks cities that already have established mobility services running are good places to launch, and he likes the competition. But what will be the competitive factors?
Already, third-party apps are lining up to provide a single app interface to multiple modes of transportation; early movers include RideTap and, in Europe, Moovel, both owned by Daimler. Once a consumer can see both the cost and availability of two services, it's likely that the race will go to the swiftest and cheapest.
Cottle thinks the airlines provide a good analogy for how this will shake out. Just as some travelers always go for the lowest-priced fare while others are brand loyal, some mobility services customers may shop for price while others will be willing to pay more for a premium vehicle – like the BMW.
Loyalty programs could be the key, Cottle says. ReachNow recently launched a loyalty program with Validated that will let riders earn credits toward free rides.
Spinning off
In startup mode, ReachNow was launched from scratch in just five months by a cross-cultural team. Based in Seattle, the company operates independently from its parent, according to Broesamle. While automakers take months or years to make decisions, he points out that, if ReachNow makes a change to its app or service, "The very next day, 40,000 people will know. You are very close to the end customer, which is different than the traditional OEM."
By allowing its mobile services to operate semi-autonomously, BMW may have found the best of both worlds when it comes to mobile transformation.