Regularly, I get asked how Uber, car sharing providers, and other mobility providers plan on making profit. How can you be cheaper than cabs, but have a similar business model? How can you make money with car sharing, when a ride only costs around 10 dollars? How is it possible to make money on scooters, that only cost one dollar per ride? But still, Uber, Mercedes, and venture capital companies keep spending millions, if not billions, on these ventures. Why? What is going to change? – Everything!
The status quo of mobility is at the same time very chaotic and very neatly structured. It is chaotic, because all sorts of providers play a role. Public transport offers buses, subways, trams, taxi companies offer cars with drivers roaming the streets, car hailing companies offer cars with drivers on demand, bike/scooter/car sharing companies offer vehicles without drivers, and so on. Choosing how to move from A to B requires a scientific analysis of all the options, speed, and price. Not many people will do that on a daily basis and therefore habit will make the decision. Choose what you do every day so you don’t have to think about it anew every day.
However, it is also very structured, divided in separate silos. For public transport, you purchase one (or sometimes even two) ticket(s). You pay for the cab fare with the cab driver. And the car-sharing fee is taken separately from the car sharing company. And even when searching for the fastest route, there is an app from the cab company, an app for public transport schedules, and only Google (not a mobility provider themselves, yet?) have started combining and comparing different options. But even Google doesn’t show you that the optimal mode of transport might be public transport for the first half and a shared bike for the second half of your journey.
This is all but efficient, but two major technological developments will change all that. The first is already underway. An example of this is whim. It is a single platform/app, which combines all available modes of transport: public transport, taxi, car, bike, and everything else. Where do you want to go? This app will not only show you which vehicle is the fastest, but it will also combine these vehicles and their prices. With whim, you can really find the most efficient way to get somewhere, with only one click of a button.
Driverless vehicles will be the second big change. The cost per extra vehicle running is reduced significantly without a person behind the wheel. Cabs become cheaper and public transport companies can use more, but smaller, vehicles. Side note: With autonomous driving, cabs and car sharing will become one.
If we finish this train of thought, we end up with small vehicles, that run on demand and pool together passengers with similar routes. This doesn’t stop on the road. Even trains can become smaller but run more frequently. Schedules will become unnecessary, because vehicles always take the perfect path for all passengers. No need to wait for a bus at a certain time. Just demand a route through the app, and the algorithm will guide the optimal vehicle to pick you up where and when you need it. This might sound utopian, but driverless vehicles will make it possible.
In other words: Currently, mobility is divided in vertical silos. Each mode of transport for itself. In the future, it will be divided in horizontal layers. Apps, that combine all modes of transport on top and mobility suppliers, which integrate with the guest facing app and provide the vehicles.
It is understandable, that so many current mobility providers venture out into new modes of transport to avoid being degraded to a supplier to the powerful top level user-facing apps. When the development is complete, you want to make sure that you control the user-facing app. This is why BMW and Mercedes join forces to create a mobility platform, this is why Uber is developing self-driving cars, and this is why everyone is willing to take losses for a couple of years. When the time comes, you won’t succeed in your vertical silo. You need to be the horizontal winner.
And that is not even all of it. This is only a fraction of the bigger logistics battle. If you have vehicles driving around as requested, you can not only transport people, but also goods. Uber was one of the earliest to recognize that and established Uber eats. Transporting Pizza or a person, it’s the same. Airlines have done this for decades. Parcels are not only being shipped in cargo planes, but also on passenger plane.
When talking about mobility, we always need to keep the big picture in mind. Companies are playing the long game. Pay offs will be immense. But it’s a winner-takes-it-all product. Scalability is everything. So you can’t wait it out. You need to be part of creating that change, or be left behind.