Imagine a future, where fleets of sleek, driverless electric cars whisk groups of passengers seamlessly and quietly from point to point across our cities on demand via smartphones or other wireless devices.
According to some analysts, that future is closer than it seems. Developers are already looking beyond schemes that started as basic smartphone app friendly cab services to move us closer towards a sci-fi style vision of fully shared automated electric transport vehicles and systems designed for the cities of the future. The question is: is this feasible?
At a business level, the growth of private cab service providers, such as Uber and Lyft, in markets like the US has already eaten into the market share of conventional taxis and public transport, demonstrating the disruptive influence of new technologies on transport. Increasingly, investors and ridesharing companies hope that this approach can be extended to fleets of driverless electric vehicles in the future.
Yet, for now, some doubts remain over more advanced ride sharing vehicles and systems – particularly over the reliability of related technologies, ongoing regulatory and safety concerns and doubts over the feasibility and potential profitability of some related business models.
A growing market
According to global management consulting firm McKinsey, shared mobility – which includes ridesharing, car sharing and on-demand ride services – has now reached a global market value of over US$60bn, with an annual growth of 20% forecasted as self-driving taxis and shuttles become more common. McKinsey identifies China and the United States as the largest markets for shared mobility at US$24bn and US$23bn in size, respectively.
Barry Mills, director, senior research analyst at Mellon believes the ridesharing market holds huge potential, though he is quick to stress that its technology and development is still at a relatively early stage with few related companies publicly listed on worldwide markets.
“While the comprehensive introduction of rideshare systems could take years to develop, we anticipate significant progress will be made by 2020 to 2021, at which stage we believe people will be far more aware of the importance of this sector. Looking ahead, people in cities are less likely to buy a car if there is a good transport service, and we are not alone in believing the world is moving toward the wider use of robo-taxis and automated vehicles.”
Source: Statista Digital Outlook. *Excluding car sharing services that enable users to rent cars that they drive themselves (station-based or free-floating). Some information contained herein has been obtained from third party sources that are believed to be reliable, but the information has not been independently verified by BNY Mellon. BNY Mellon makes no representations as to the accuracy or the completeness of such information.
From an investor standpoint, Mills adds analysts are carefully assessing the key performance indicators of companies involved in ridesharing by analysing metrics such as how many cities ridesharing suppliers serve and the cost per mile of operations they run.
He adds that the increasingly inadequate public transport infrastructure of some US cities offers real potential for growth in ridesharing services. Market research specialist Mordor Intelligence suggests the North American ridesharing market looks set to register a compound annual growth rate of over 17% from 2018 to 2023 and Mills believes some other global markets are also ripe for the development of shared mobility solutions.
“Cities with poor public transportation might see ridesharing as a great supplement to public transport. Ridesharing makes a lot sense in a city like Los Angeles, which has terrible public transport, and shared mobility also holds broad appeal in global markets such as China. Many people living in cities are also realising that owning a car is a wasted resource, as it spends most of its time parked and the rest of its time contributing to traffic congestion,” he adds.
Wheels in motion
Some real progress is now being made towards the roll-out of driverless vehicles and ridesharing systems. In November last year, automotive giant GM announced plans to launch a commercial fleet of fully autonomous robo-taxis across some US towns and cities in 2019.
With US cities such as Phoenix, Arizona, and states such as California also keen to embrace driverless vehicle technology and shared mobility, others are now also joining in and finding new applications for them.
While facilities such as ridesharing and electric cars are perhaps most closely associated with younger generations, some believe they could also hold major benefits for elderly and disabled people. As just one example, mobility in a retirement community in San Jose, California, has reportedly been transformed by the introduction of driverless vehicles with residents now able to engage in a much wider range of social activities thanks to their new-found shared mobility.
Elsewhere, a disability rights coalition in Michigan recently persuaded local lawmakers to make the state a hub for innovation in driverless technologies in order to devise new facilities to help those with disabilities.
Current & projected number of ridesharing users globally
Despite these innovations, many regulators remain wary of their underlying technology, though others argue it could ultimately reduce traffic and actually save lives. Achieving a safe balance between automation and hands-on control of cars has proved difficult, and regulation in this area is being keenly monitored by the insurance industry in markets such as the UK.
Commenting, Mills adds: “Given that over 90% of US road deaths are attributed to human error, automation may in future bring the scope to create genuinely safer roads. A number of trials are being conducted in this area but, ultimately, regulators in individual states and jurisdictions will need to be fully satisfied of their safety records and time will tell what benefits they might bring.”
While ridesharing itself may seem novel to individual car users and could also raise concerns about personal safety, Mills believes users will become more confident with the concept and practicalities of ridesharing over time.
“Many new technologies have prompted early concerns. When internet payment was first launched, many were concerned about the security of their bank details until providers could demonstrate their high levels of security and users became more comfortable with them.
“In many ways ridesharing is little different to sitting next to strangers on a subway train or bus and in-car security cameras could bring an added level of reassurance to passengers. Younger generations are already embracing the ridesharing trend and, over time, I expect many more people will become comfortable with it as well,” he says.
Beyond personal safety, the rise of ridesharing has also prompted some wider fears it could decimate the automotive industry. In May 2017, a Reuters/Ipsos opinion poll found nearly a quarter of American adults had sold or traded their vehicle in the preceding 12 months, with 9% of this group turning to ridesharing services as its main mode of transport.
1 Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA), BNY Mellon Fund Management (Luxembourg) S.A. (BNY MFML) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA, BNY MFML or the BNY Mellon funds. Mellon was formed on 31 January 2018, through the merger of The Boston Company and Standish into Mellon Capital. Effective 2 January 2019, the combined firm was renamed Mellon Investments Corporation.
2 McKinsey Center for Future Mobility. Shared mobility as at 12 June 2018.
3 McKinsey. How shared mobility will change the automotive industry. 01 April 2018.
4 Mordor Research. Ridesharing Market – Segmented by North America (Porter’s Five Forces Analysis, Country, Membership Type, Services, Competitive Intelligence), Europe, Asia-Pacific, Rest of the World – Growth, Trends and Forecast (2018 – 2023). 05 March 2018.
5 Reuters. GM plans large-scale launch of self-driving cars in U.S. cities in 2019. 30 November 2017.
6 USA Today. Driverless cars can transform lives — if we change the rules and let them. 21 November 2017.
8 CNBC. Driverless cars aren’t safe or ready for the road: Robotics expert. 20 March 2018.
9 ABI/Thatcham Research. Regulating Automated Driving. The UK insurer view. 31 July 2017.
10 Reuters. Some Uber and Lyft riders are giving up their own cars: Reuters/Ipsos poll. 25 May 2017.