Ride-sharing and ride-hailing (let’s refer to them collectively as “ride-x”) currently account for only 4% of miles driven globally.
But according to a Morgan Stanley study, that figure will climb toward 30% of total miles driven by 2030, and a McKinsey & Co. study from 2017 showed that 63% of people who currently use ride-hailing services plan to use them significantly more in the next two years.
In another area of the industry, a separate trend is rising: autonomous vehicles. California’s roads are set to see self-driving cars as soon as this year. Others predict the vehicles will become commonplace within five or 10 years, bringing what was once a sci-fi pipe dream into reality.
As these two trends grow, they are bound to intersect; that is, as more cars become driverless and more riders wish to share and hail rides, a portion of ride-x vehicles more than likely will become driverless. So what does that mean for the original-equipment manufacturers behind the scenes?
Impact on OEMs: What’s Next?
Autonomous-drive models and formats led by artificial intelligence have the potential to dominate and revolutionize the ride-service businesses. Here are just a handful of the many compelling reasons for automotive OEMs to keep an eye on the convergence of ride-x and autonomous vehicles:
1. Bulk sales: Negotiating a bulk deal with a ride-x company would replace thousands of individual hard-won vehicle sales with a single massive order, an attractive deal for OEMs.
2. Simpler design: Vehicles designed primarily for backseat passengers require fewer fancy features and can enable automakers to commoditize design and build simpler cars at a lower cost. This will let manufacturers focus on providing clean, comfortable and safe vehicles rather than unnecessary bells and whistles.
3. Boosts in car-related services: On average, the ride-service vehicle will clock higher mileage per day than an average privately owned vehicle – meaning both the revenue from car services (maintenance, repairs and updates) and the rate at which vehicles’ operating wear-and-tear health depreciates will increase significantly. The former will offer higher service business while the latter will offer a faster replacement-vehicle sale opportunity compared with an average privately owned vehicle.
4. Expansion of customer base: Because of autonomous ride-x’s economic-value appeal and the fact it doesn’t depend on age, driving skills, license, etc., its popularity is likely to attract a much larger population of riders – especially those who don’t own cars and who live in areas where mass-transportation options aren’t as evolved. OEMs could connect with and service even this population, growing their customer bases to reach demographics once thought to be inaccessible.
5. Reimagining used-car business leverage: In the case of the autonomous ride-x trend, the prospect of used (i.e. depreciated) vehicles entering the used-car market becomes bleaker. And as the volume being moved through ride-x increases, the used-car market could find itself slowly weakening, upsetting that ideal equilibrium between the new- and used-car markets. If OEMs don’t want to be caught off-guard by major shifts in this market, it’s critical for them to remain associated with ride-x companies and monitor the ripple effects the trend has on the market as a whole.
6. Learning and experimentation grounds: Partnerships with existing ride-x companies would allow automakers to gain the experience and expertise necessary to eventually launch different formats of ride-x services of their own under their mobility-services umbrella.
The path ahead for automotive-mobility evolution is still not clear. The next three to five years will bring changes that will shape and refine what autonomous ride-x actually will look like.
Until then, progressive automotive OEMs and ride-x companies must continue experimenting and perfecting the trends that feed into this shift in the industry. Only then will they be able to win in the future when autonomous ride-sharing and ride-hailing is no longer a budding trend, but a thriving reality.
Partha Mukherjee is general manager and global client partner for Wipro, where he focuses on P&L and relationship management. The views expressed in this article are his, and his employer does not subscribe to the substance or veracity of these views.