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Customer LoginsGM continues evolution into a services company with Maven
On every front traditional automakers are under siege. Despite a banner year for car sales here in the US and globally, executives at nearly every major OEM are unusually cautious about what the future holds.
Compounding the slumping market factors (China, Millennials skirting car ownership) are potential disruptors in the automotive industry, and these disruptors appear to be more attune to what today's market is asking for. A fairly recent phenomenon, which grew out of the ubiquity of smartphones, is ride-sharing. This six year old industry has already consolidated down into two large players, Uber and Lyft. Both offer a cheap and convenient way for today's carless Millennials to get around town, an innovative software platform that allows for easy deployment or tweaking of new services, and a rich source of analytical data.
Car-sharing, an older business model that started in the early 1990s, allows you to locate a nearby rental car (typically within walking distance) to borrow at an hourly- or daily-rate. Car-sharing is currently dominated by enterprise level car rental companies like Avis (who owns ZipCar), Hertz and Enterprise. These two industries-ride-sharing and car-sharing-as well as traditional rental car agencies form the core operational building blocks for future urban mobility/autonomous vehicle fleets.
If traditional OEMs aren't paying attention they may end up becoming subservient to these future fleet operators as most consumer behavioral and purchasing trends suggest we are primed for the autonomous car age. Automakers aren't taking this lying down, however. They are fighting back on almost all fronts, as the table below demonstrates:
From a services standpoint, GM has made the most aggressive and speedy foray into both ride-sharing and car-sharing. Part of the value here for GM is its long and steady history of investing into telematics services-and more recently connected services-through its wholly owned OnStar subsidiary.
GM chief executive Mary Barra revealed last September plans to capitalize on connectivity built into the company's cars, expand car sharing services, offer more autonomous driving features and enable services through smartphone apps. This was followed by a $500-million investment into ride sharing provider and platform Lyft, and more recently, the acquisition of Sidecar Technologies, a San Francisco-based ride-handling startup.
For this insight we will focus on the announcement of General Motor's personal mobility brand Maven. Maven is an amalgamation of several GM car-sharing services which today already serve tens of thousands of users. Maven has been launched with a car-sharing program called City, which is available to more than 100,000 faculty and students in Ann Arbor, Michigan, United States. Customers can search for and reserve a vehicle by location or car type, and the cost is $6 per hour, including insurance and fuel. The app enables remote start, heating, and cooling the vehicle, as well as Apple CarPlay, Android Auto, OnStar, Sirius XM Radio, and 4GLTE in-car wireless.
In the first quarter, Maven will integrate GM's Let's Drive NYC program and expand it to Chicago residents. The scheme gives residents of specific buildings access to on-demand vehicles and preferred parking. The CarUnity program in Germany will also be incorporated into Maven, providing a peer-to-peer outlet.
Maven isn't all that different on the face of it than the two largest OEM driven players in car-sharing, which includes the following:
- Daimler's car2go with nearly 1 million users in 29 cities and 12,000 Smart cars, making it one of the largest car-sharing operators
- BMW's DriveNow with more than 300,000 users and approximately 4,000 vehicles
Judging from these figures there is a viable business here for GM and there are many markets still left untapped. University campuses have been the petri dish for which most car-sharing programs get started, so GM's partnership with the University of Michigan is a rational starting point for the service to get its running legs.
Source of recurring revenue
Beyond PR, brand exposure, and technical expertise, however, what does GM or any automaker really, expect to gain from car sharing?
In the eyes of OEMs, new urban mobility is a lucrative new business line, potentially as lucrative as captive lending, aftersales, and telematics and connected services. More importantly it's a source of recurring revenue. Auto sales fluctuate tremendously due to seasonality which makes managing cash flow, and capacity utilization challenging. Eventually, once car-sharing and ride-sharing merge into a single on-demand autonomous car service there's a large opportunity here for new urban mobility to satisfy both a recurring revenue benefit for OEMs but also as a tool to sop up excess plant capacity during times of seasonal downturns. Overall, this would help to strengthen and flatten the revenue curve.
GM is putting the pieces together
Eventually car-sharing and ride-sharing will become two sides of the same coin in the autonomous car age. Ride-sharing in its current form doesn't lend itself as well as car-sharing to traditional OEM business models. Car-sharing doesn't require an OEM to manage hundreds of thousands drivers. Once the drivers are out of the equation, an on-demand autonomous fleet of vehicles would be something more in an automaker's wheelhouse.
What GM is doing is putting the pieces together strategically to reap the benefits decades from now, when such autonomous fleets are commonplace. GM has a leg up on most OEMs, having global coverage, and decades of IP for its telematics services, and a large deployment of vehicles with embedded telematics.
Colin Bird is Senior Analyst, Automotive Technology, IHS Automotive
Egil Juliussen, PhD is Senior Director & Analyst, Automotive Technology, IHS Automotive
Posted 22 January 2016