Why is shared mobility (still) not profitable?
And how to change that
Shared mobility isn’t something that showed up just a decade ago. People have been juggling with the idea ever since the 1940s, when ridesharing began during the war through “car clubs”. The modern manifestation debuted with the first major ride-hailing player appearing, and the field has grown significantly ever since. Fast-forward to 2020, when a global pandemic seemed to be the last thing that the up and coming shared mobility industry needed. However, with nearly 2 years in dealing with the new normal, we can observe that the shared transport innovators have not only coped and adapted, but some have even thrived.
In an interview for intertraffic.com, Marius Koch of Wunder Mobility stated the following: “Providers of shared mobility solutions have revised and improved their hygiene and safety protocols. This has led to a new leap in quality that many customers have come to appreciate as they switched to a single occupancy transport mode that reduces the risk of infection with Covid. Under the new conditions for many, a shared car, shared bike, e-moped, or e-scooter has become a real alternative to their own vehicle.”
A McKinsey study from this year comes to similar conclusions and sees MaaS as the future of urban mobility. Despite these predictions, there continues to be concerns raised that question the actual benefits of shared mobility - mainly that carsharing isn’t profitable.
Good businesses finish last
The goal for mobility companies is profitability. However it can be difficult to achieve, as high initial investments can present certain challenges on the path to a profitable shared mobility business. But as with any challenge, knowing exactly what you’re dealing with is the first step in overcoming it.
From an end consumer’s perspective, shared mobility services work just fine and they answer to their convenience and sustainability needs. They don’t get to see the operational challenges that companies are dealing with everyday in proving their value to them. And that’s exactly how it should be. But that often leads to a minimization of the high stakes and the struggles that shared mobility operators are faced with and the essential need of services and solutions to change that status quo. Furthermore, remarkably bright ideas and innovations that can possibly change the world for the better are continuously nipped in the bud before they even have their chance to prove their value on the market.
If these businesses cannot find their way to start becoming profitable, the long-term goal of providing green and sustainable mobility options cannot be attained. In a world that’s constantly and rapidly changing, this is far from being a straightforward mission, but the ability to adapt and optimize are the key in moving forward.
What keeps profitability away
Operators are responsible for providing high-quality mobility services. This means, for example, user apps working flawlessly, vehicles always being easy to rent and unlock, and more importantly, being available where demand is high and mobility is much needed. If the user experiences technical problems at these touch points, the user will lose trust in this particular service provider, while being cautious of other shared mobility services as well. In order to ensure a flawless user experience, it is key for service providers to build their operations on a high-performance technology to run in the background.
With this approach, more users will realize that in many cases, it simply does not make sense to own a car, because the right mobility service is only a few steps and clicks away — enabling services like free floating carsharing to be more profitable. If you want to go shopping and it’s raining, take the closest free floating car. If you need to visit your grandparents across town, station-based carsharing is a good option. If you take the train to work but your connecting bus isn’t in service, take the nearest shared kick scooter or bike.
In closely working with operators around the world, we discovered a series of multi-layered challenges that each city presents. However, having worked with different types of operators, we were able to identify three common issues that are tightly correlated and significantly influence one another.
An approach and operations that are rather reactive than proactive.
For any type of vehicle, the reality is the same: in order to meet demand, the vehicles need to be in the right place at the right time. If the higher utilisation potential of a car is reached, one can easily run the same quality service with fewer cars. Vehicle utilisation certainly has its limits, such as during the night or during maintenance. Under these conditions, increasing the usability rate is possible to the point where it can make all the difference to a company’s profitability. Identifying and meeting demand, as it occurs in real time, requires knowing where the demand will be in advance - a vital information for operators. However, not a lot of them have implemented predictive operations that can help reduce costs and increase revenue.
Faulty fleet management and utilization.
With operations and processes being rather reactive than proactive, fleet management and utilization are directly affected. As stated above, identifying and meeting demand, as it is in real time, requires knowing where the demand will be in advance. This forecasting can range from basic historical data analysis (looking at demand in a certain place at a specific time), to more complex forecasting models which take into account data such as app openings, weather, holidays, special events and parking regulations. Knowing where the demand will be provides operators with the information to match demand with supply. That said, most operators are still navigating the wild market waters with no compass to show them in the right direction when it comes to fleet management and utilization.
A huge gap between supply and demand.
In the course of this year, we managed to round up the numbers and stare the actual impact of faulty fleet management and utilization right in the eye. The results were loud and clear: 60%-80% of the market demand is not met. In order to push the shared mobility movement forward, supply must find its way to meet demand and narrow this gap down as soon as possible.
Making shared mobility profitable and sustainable is achievable
At Ubiq, that’s our main focus. Shared mobility has the enormous potential to transform cities, making them way cleaner and less congested. But in order to do that, businesses need to become profitable. That is why our work and efforts are dedicated to closing the gap between supply and demand and we address that by placing vehicles in the right place at the right time. And once vehicles are charged and redeployed, they can generate a revenue increase of 20% in up to 8 weeks.
Currently, 7 out of 10 customers don't find a vehicle when they need one. Our practical solutions to address that are Automated Rebalancing and Charging as a Service (ChaaS).
Automated Rebalancing: Unrivalled scalability and reduced operational effort
By utilizing the power of the crowd, mobility providers can benefit from a decentralized operational ecosystem for 24/7 fleet rebalancing. Ubiq takes care of recruiting, managing and steering of the crowd so you don't have to worry about whether your vehicles are in the right place.
Charging as a Service (ChaaS): Automating the charging process to boost revenues
To keep fleet availability high, vehicles need to be charged when they aren’t in use, rather than when they are empty. This means exploiting nearby charging infrastructure and combining the charging with vehicle rebalancing to maximize operational efficiency.
In the absence of a clear strategic roadmap for electro-mobility, services such as provided by Ubiq, are key in order to ensure an e-carsharing fleet that is readily available and fully charged. - Elisabeth Müller, City Manager ELOOP
To guarantee the bright future of shared mobility services, operators need to rely on a powerful technological solution to support their services, reduce costs and increase revenue. This solution needs to be fast, open, scalable, and modular, in order to provide the freedom to adapt to customer needs at any time without any technical restrictions. We can provide that solution and help shared mobility move forward.
Let’s get in touch and discuss how to make your shared mobility business profitable!
Ubiq enables operators to effectively position fleets to serve strategic goals. For more information, contact email@example.com