The intersection of the technology and transportation industries is drastically altering the mobility landscape. This union has created entirely new value streams and business models, attracting the attention of consumers and automotive companies (OEMs) alike. Numerous new passenger transportation options, collectively called innovative mobility services (IMS), have emerged in the past twenty years and some have seen significant growth. IMS include carsharing, ridehailing, bikesharing, ridesharing, microtransit, and scooter sharing programs, and collectively these are opening or expanding in cities across the globe every month. Ridehailing services provided by companies such as Uber and Lyft have grown rapidly. Almost ten years after the creation of the first Transportation Network Company (TNC), ridehailing is now available in more than 300 U.S. cities, and one in four people in major U.S. metropolitan areas has used this type of mobility option. As of January 2017, the United States had nearly 2 million carsharing users for almost 25,000 vehicles. While North American carsharing programs have grown slower than ridehailing programs, they still averaged a 26 percent annual membership growth between 2007 and 2017.
Innovative Mobility Services
IMS work best in denser and walkable urban areas with good public transportation networks. These services are more popular in areas with good public transit, because they are are used in combination with other modes, especially public transit. The early adopters of IMS tend to be younger, with higher education and income levels, and own fewer vehicles than the U.S. average. The increasing adoption of innovative mobility services is changing travel behavior. Overall, innovative mobility services both complement and compete with public transit and private vehicles. Half of U.S. innovative mobility users walk or bike more, and fifteen percent of them use transit more often than they did before signing up for a mobility service. Conversely, almost a third of them drive less than before they started using a mobility service and in some cases give up owning a vehicle entirely. 
The drop in vehicle ownership associated with the growth of IMS will likely cause only a small decrease in vehicle sales in the short- to medium-term. Nevertheless, IMS will have a profound effect on how people think about mobility, on the way people relate to vehicles, and how transportation services are organized and paid for. Across the globe, mobility providers have captured the interest of consumers and venture capital alike. These startups are disrupting automakers and threatening vehicle manufacturers’ share of auto industry profits. Beyond presenting a challenge to the vehicle ownership model, the expansion of IMS could influence other aspects of the automotive industry and related sectors such as the automotive value chain, supply chain, logistics, automotive insurance, and vehicle maintenance and repair.
In recent years, automakers have multiplied their efforts in the mobility space, as a way to hedge their bets if there will be a substantial shift towards multimodal transportation and away private from car ownership. OEMs are experimenting with several business models because it is still unclear which ones will gain the most market share and prove to be the most scalable and profitable in the long term. Vehicle manufacturers such as Ford and Volkswagen have announced their intention to become mobility companies that offer different services alongside their established core business of manufacturing vehicles. Automakers have started investing in, partnering with, and acquiring mobility and tech companies, as well as creating mobility subsidiaries. Daimler owns car2go and moovel, General Motors has Maven, and BMW has ReachNow. Toyota invested in Uber, Getaround, and Grab; Ford acquired Chariot and TransLoc. General Motors has partnership agreements with Uber and Lyft, Ford with Lyft, and Nissan with Scoot.
Investors see innovative mobility and driving automation as the future of transportation, and they are willing to provide startups in this space with extensive funding. The most extreme example is Uber, which was valued at $72 billion in February 2018. For that reason, some automakers are becoming active in the mobility space as a way to signal the markets that they are forward-looking and ultimately to increase their share value. Mobility services are also attractive for automakers because they seem to be a non-recessionary business not affected by vehicle sales cycles. Providing in-house mobility services could make automakers less vulnerable to sales cycles and, for that reason, also boost their standing on the stock market.
Traditionally, the automotive sector has been a highly capital intensive business with thin margins; mobility services are an opportunity to change that. Automakers are developing their own mobility services, because they are seeking to create new revenue streams and to capture more of the value in transportation. OEMs and venture capitalists expect innovative mobility services will start yielding double-digit profit margins, much higher than the four to nine percent automakers’ core business currently generates. Former Ford CEO Mark Fields commented at CES in 2017 that he believed 20 percent margins were attainable for mobility services. That remains to be seen; ridehailing companies like Uber and Lyft have had substantial losses since their creation, and even carsharing programs struggle to make a profit. For example, despite an encouraging last quarter, in 2017, Uber still lost $4.6 billion, up from $2.8 billion in 2016.
With the growth of mobility services and driving automation, for automakers the risk is to be relegated to the role of hardware providers for mobility platforms. That would pose a double threat for automakers; first, by missing out on the potentially high profit margins of mobility services and, second, by making more fleet sales than they do today. In the past two to three years, the quest for profitability became more important than market share. OEMs are not only discontinuing specific models – mostly sedans – but, they have also have lowered fleet sales to traditional car rental companies because these generate much lower margins than vehicles sold at retail prices. Therefore, OEMs are not eager to replace conventional fleet sales to car rental companies with sales to carsharing programs and negotiated leases to ridehailing companies.
OEMs also see mobility services as tools to maintain brand awareness and their customer base even in a world where fewer people will own vehicles. On-demand mobility services are a way to generate ongoing income and to engage more with customers frequently than just through a vehicle sale or lease every few years. Building customer relationships through IMS is an opportunity for vehicle manufacturers to diversify their activities and to strengthen their market share in urban areas and with the younger generations. Partnerships with IMS companies give automakers increased visibility to mobility users (who might one day become car buyers), as well as access to valuable consumer data and analysis. Access to data seems to be crucial for OEMs to understand their customers better, be more responsive to their needs, and identify new revenue streams.
Finally, for automakers, developing mobility programs or partnering with IMS providers is a way to acquire the much-needed experience building the business models that they will need for the deployment of automated vehicles. Most automakers have announced their first self-driving vehicles will be available through mobility services, and the business side of deployment might prove to be as important as the technology side.
The rise of innovative mobility services is part of a mobility evolution, a long-term gradual shift in transportation preferences, toward a multimodal system that is less centered on personal cars. In the next decades, sales of vehicle miles traveled on mobility services will become as important as vehicle units sold, as IMS grow and expand to more and more areas. We are already seeing the first signs of consolidation of companies with OEMs acquiring mobility startups, merging their mobility brands like Daimler and BMW recently announced, or mobility companies seeking regional dominance through acquisitions and sales like what Uber is doing in Asia. A final growing trend is to build platforms offering carsharing, ridehailing, and other modes, which seek to make the mobility-as-a-service concept a reality. This push for mobility platforms will only accelerate with the deployment of automated vehicles, which will make carsharing virtually the same as ridehailing.
These topics and many others will be central to our 2018 CAR Management Briefing Seminars. Understanding the vectors of change in the mobility sector is crucial for established automotive companies and emerging mobility companies to define their strategies. Join us this summer in Traverse City to hear from automakers, suppliers, and mobility startups about their current projects, strategies, and their vision for the future of mobility. Mobility sessions include:
 Clewlow, Regina R. and Gouri S. Mishra (2017). Disruptive Transportation: The Adoption, Utilization, and Impacts of Ride-Hailing in the United States. Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-17-07.
 Shaheen, Susan, Adam Cohen, and Mark Jaffee (2018). Innovative Mobility: Carsharing Outlook, UC Berkeley.
 Spulber, Adela, Valerie Sathe Brugeman, Eric Paul Dennis, and Zahra Bahrani Fard (2017). Future Cities: Navigating the New Era of Mobility. Michigan Economic Development Corporation and Center for Automotive Research.
 Murphy, Collin and Sharon Feigon (2016). Shared Mobility and the Transformation of Public Transit, TRB, Transit Cooperative Research Program.
 Spulber, Adela, Eric Paul Dennis, Michael Schulz, and Richard Wallace (2016). The Impact of New Mobility Services on the Automotive Industry, Center for Automotive Research.