Over the last few years we have started to see some significant changes to the way we travel – in particular within cities. One of the emerging themes is Mobility as a Service, or MaaS, which is being used to describe the integration and convergence of new technology and the transition away from personally owned vehicles.
In our view, there are three developments which illustrate how MaaS is having a major impact on the way we travel:
Firstly, ‘on demand’ Ride Hailing and Ride Sharing
Spearheaded by companies such as Uber, Lyft and Gett, on-demand ride hailing has exploded in cities across the globe. Ride hailing uses mobile technology to connect drivers with customers and leverages advanced analytics to increase efficiency (see Uber Surge Pricing[i]). The growth has been phenomenal – Uber has grown to be one of the largest private companies in the world, valued at c£68bn, and has over 3.5million regular users in London alone[ii].
On demand ride sharing is based on the same principles as ride hailing, but aims to decrease costs by connecting multiple passengers travelling in a similar direction and thus maximising vehicle capacity. Some existing ride hailing operators already offer shared services, such as Uber Pool. We have also seen the expansion in specific ride sharing operators such as Daimler-owned ‘ViaVa’ and Ford’s ‘Chariot’ – both recently launched in London.
Secondly, Car Clubs
On-Demand ‘car clubs’ enable customers to use an app to locate an available car nearby. They charge for the duration of use, including fuel and insurance. The cars can then be dropped off anywhere within a specified zone, ready for the next customer to pick up. Notable examples are ZipCar, which now has over 185k members in London, and BMW’s DriveNow, which has over 300 vehicles available to drive in North East London. Traditional car rental businesses, e.g. Enterprise Rent-A-Car, are following
suit with their own similar offers. Promising to remove much of the cost and hassle of car ownership, BMW estimates that every car in the DriveNow program replaces at least three privately owned cars[iii].
Thirdly, multi-modal Transport – Bike/Scooter Sharing
There has also been growth in alternative modes of mobility, notably bike and scooter sharing. With many cities already operating self-service cycle hire schemes, some new companies are now offering dock-less self-service bike rental. For example, Alibaba-backed Ofo operates in over 250 cities and is targeting 150,000 bikes across London, dwarfing the 12,000 bikes currently available under the “Boris Bike” scheme[iv]. Likewise, American based scooter sharing company, ‘Bird’, is racing against a number of rivals to expand globally. Although it is just one year old, Bird is currently valued at $850m[v].
What does this mean for incumbent mobility providers?
In short, lots of change. As urban populations continue to grow, traditional forms of mobility are increasingly viewed as expensive and inefficient. Privately owned vehicles sit idle for 95% of the time, yet people in London spend on average 100 hours a year stuck in traffic[vi] and 12% of their income on owning a car[vii]. This is contributing to a declining interest in car ownership, with 30% fewer 18-25 year olds now learning to drive[viii].
The rise of more flexible alternatives has also changed public transport usage. Coupled with an increasingly negative perception of public transport - there has been a 2% drop in tube journeys in London since 2016 and TFL have projected a £240m decrease in fare income for this year[ix].
As the pace of modern life continues to increase, so does the range of new urban mobility products. Technology developments have enabled this rise, self-evident in our cities. Customers expect flexibility, efficiency and (increasingly) environmentally responsible options. Not only do the new platforms serve these needs, they could tackle important challenges of air pollution and accessibility.
For incumbent mobility providers to thrive, they will need to react, adapt and cooperate with the new entrants to provide dynamic, customer-centric and cost-efficient mobility solutions.
For example, Automotive manufacturers will need to continue expanding their offering with products such as flexible rental and ride-hailing. Similarly, public transport operators must continue integrating various modes of transport to provide a seamless customer experience. At Moorhouse we have seen great examples of the changes that are happening though our work supporting Airports, Automotive organisations and also regional infrastructure bodies.
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