It is not surprising that companies like Uber and Lyft are making public pronouncements that the end of car ownership is nigh. Statements like that make their futures look bright and play well with stock markets. Perhaps more surprising is the fact that automakers are preparing for the same future. Their very existence has centered around the ownership model of business for the past century. What’s more, TaaS may dramatically reduced the number of vehicles in operation, which will further impact their businesses.
So why are auto manufacturers investing in this future instead of fighting it? For one, they may see the writing on the wall. Auto companies chronically struggle with incredibly thin margins. To make matters worse, companies like Toyota are seeing through their surveys and sales that millennials are less interested in and financially capable of buying a car. Companies like Uber and Lyft are making car ownership less important. Driverless cars will only further sever the link between mobility and ownership. These trends will make the historical business model of ownership increasingly unsustainable.
Perhaps more importantly though, auto manufacturers see a very bright future for TaaS. Ford estimates the value of the global car ownership market at $2.3 Trillion. They estimate that the TaaS market, with the addition of autonomous vehicles, will be worth $5.4 Trillion. This presents an enormous opportunity for automakers. After all, Uber, by some measures, is already more valuable than companies like GM, Ford and Tesla. With autonomous vehicles just around the corner, the companies producing these vehicles have an inherent advantage in the future of TaaS.
This is why every single one of the top 10 most valuable car companies has invested heavily in developing TaaS. They are either buying companies, investing in them (GM invested $500 M in Lyft), or creating their own subsidiaries (Ford and Volkswagen created TaaS subsidiaries from scratch). Below is a brief summary of what these companies are doing.
- In 2016 Ford created a private subsidiary call Ford Smart Mobility to grow their business in ride sharing and ride hailing. The venture is located in Silicon Valley. Jim Hackett was the head of the venture.
- Ford Smart Mobility purchased Chariot, a ride hailing service, to accelerate development of mobility services.
- Ford named Jim Hackett as CEO in 2017 signaling the importance of TaaS to the future of the company.
- In January 2016, GM invested $500 M in Lyft, a ride-hailing service.
- Lyft CEO, John Zimmer, claims vehicle ownership will “all but end” by 2025.
- Elon Musk has announced Tesla Network, which will be a ride-sharing service for Tesla Owners. Strictly speaking, this isn’t the end of ownership for those buying Teslas, but it is a move in that direction for those renting vehicles from Tesla owners.
- Renault-Nissan has partnered with Microsoft to develop a ride-hailing, ride-sharing service.
- Renault-Nissan has partnered with Transdev to develop an on-demand transportation service.
- Honda has partnered with Grab, Inc., to develop a mobility services platform.
- BMW has created a ride-sharing service call ReachNow.
- In 2016, Volkswagen launched Moia, which is a standalone company focused on providing mobility solutions.
- Daimler purchased RideScout, Car2Go, and mytaxi, which are car-sharing, ride-hailing services.
- Toyota is actively developing a new mobility services platform from scratch. They have also partnered with car sharing company Getaround to pilot mobility service options.