Automakers spot a profit opportunity in mobility services

When mobility app RideScout launched in November 2013 in Washington, D.C, automotive giant Daimler AG pounced.

The automaker quickly showed interest in RideScout the next summer, and in September, Daimler announced that it had acquired the company for an undisclosed amount.

RideScout, like Daimler's moovel smartphone app in Germany, puts taxis, bikes, car sharing, buses and trains at the fingertips of people looking to get from point A to point B in 69 cities in the U.S. and Canada.

RideScout's mission meshed perfectly with that of Daimler, parent of Mercedes-Benz.

"Daimler itself is a mobility company. When you think about that three-pointed star of the Mercedes emblem, it points to the company's history that they wanted to provide mobility solutions in three places: on the ground, in the air and in the sea," said Joseph Kopser, a U.S. Army veteran who co-founded RideScout in 2011. "They were all about mobility in whatever form it took."

Daimler is looking to lead in the mobility segment with services under its own umbrella. The speed with which it snapped up RideScout shows how serious the company has become about mobility services. 

And it's not alone. Changing mobility habits among consumers are fueling an aggressive exploration of new business models by automakers that could potentially pad their bottom lines in the decades to come -- even if fewer people buy cars. Daimler, showing there's money to be made, said in November that it expected its mobility arm, moovel GmbH, to bring in 100 million euros ($112 million) for the first time in 2014. 

The techniques among automakers looking for sweet spots in the evolving mobility world are wide-ranging, but one thing is clear: They see real value. 

"There are a lot of different business opportunities. What we're trying to understand now is where Ford plays a role in this," said Erica Klampfl, Ford Motor Co.'s future mobility manager, during a January interview at the Detroit auto show. 

"Do we provide vehicles for our customers just to share access to? Who do we partner with to make that happen? Does Ford do it alone? So there are a lot of business opportunities we are really excited about." 

Generating profits from mobility services, analysts say, will require dexterity from automakers that have traditionally seen themselves as movers of metal. 

Analysts say car companies will have to rebrand themselves as mobility service providers that can meet consumers' needs at any level -- whether the consumers are buying a car, or just renting one for a few hours.

The marketplace is already seeing an infusion of fresh ideas.

• Daimler is taking an all-of-the-above, intermodal approach with its moovel app and RideScout. The company's expanding mobility portfolio also includes Car2Go, a car-sharing service, and mytaxi, the taxi booking app Daimler acquired fully last year, among others. 
• Ford is conducting mobility-related experiments around the globe, while trying to encourage creativity in Detroit for entrepreneurs alongside Verizon Telematics, supplier Magna International and startup accelerator Techstars (see related story, above).
• General Motors is using Enterprise CarShare as a brand-building tool to promote its budget-friendly Chevrolet portfolio in pricey San Francisco in an exclusive four-month program in which only 2015 Chevy models are available. The exclusivity agreement began last month. 
• Honda and car-sharing company Zipcar are teaming up in Boston as Zipcar tests a more versatile one-way business model. The Zipcar ONE>WAY service offers the Fit exclusively, so it's a prime branding opportunity for Honda.

  "When Zipcar was exploring growth opportunities such as what they're beta testing in Boston now, they came to us wanting to be a partner in that," said Steve Center, American Honda's vice president of environmental business development. "We thought that was a great opportunity to work together to create a new service within the car-sharing space."

New business models in which consumers no longer view cars strictly as multiyear investments could emerge and generate more profit per vehicle than ever, says Jean-Francois Tremblay, mobility innovation group leader for EY's Global Automotive and Transportation Center.

Tremblay said that during a lease, for instance, a consumer has a car for three years and during a car rental, the consumer may have the vehicle for three days.

But if that access time was cut to a few hours with a car-sharing program handled by an automaker, Tremblay said, the transaction rates could balloon to the point where offering short-term vehicle access would pay companies more than selling the car outright.

Today's practice of pushing as many vehicles into the market as possible, Tremblay said, must change if consumers no longer buy at the same rate.

As an automaker, "I need at some point to reduce manufacturing to sell less vehicles, but sell the vehicles several times," Tremblay said.

He said car-sharing revenue could exceed what a single consumer would pay for a car: "Is there profitably there? Yes."

Audi is going after the affluent crowd with fresh leasing models in two pilot programs in Stockholm and Berlin. 

The Swedish offering, Audi Unite, operates like an automotive time share in which three or four people share a lease. A smartphone app lets the group schedule when each person gets access to the vehicle. Monthly payments are based on each person's use. 

Under the Berlin plan, Audi Select, one person has access to several Audis that the consumer can rotate among for a year. 

Thilo Koslowski, lead automotive analyst at Gartner Inc., predicts that by 2020, at least one automaker will generate 10 percent of its total revenue from connected mobility and service offerings. 

RideScout's Kopser likens the mobility world to a chaotic Wild West that is disrupting the status quo. 

He says RideScout isn't anti-car. 

"What we set out to do was to show people they have options beyond just sitting alone in their car, stuck in traffic. When everybody feels they have to drive their own car because they don't see all of their options, and then they all jam onto the freeways and city streets, then we end up with traffic congestion. That's not good for anybody," Kopser said.

Systems such as RideScout and moovel thrive in cramped urban areas where high cost of living and scarce parking make vehicle ownership a chore. Many consumers in these areas end up turning to subways, taxis or car sharing as a result. 

Kopser said it was only natural that Daimler would take on a leadership role in mobility. 

In 2008, the company introduced Car2Go, a free-floating car-sharing service that offers Smart ForTwo minicars. It's available in more than two dozen cities globally. 

Under the free-floating model, a consumer needn't return the vehicle to the location from which it was obtained. But the vehicle must be parked in an approved spot when the user is done with it. 

This differs from Zipcar's round-trip setup, which requires the user to return the car to the original spot. However, with Zipcar's experiment with the ONE>WAY service in Boston, customers don't have to return the vehicles to their pickup locations. The arrangement differs from a free-floating model because the customer reserves a parking spot for the end of the trip. 

Car2Go, one of the mobility options available in moovel and RideScout, has more than 1 million customers worldwide. It also has a stand-alone app. 

In Germany, consumers are fans of taxi bookings through the mytaxi app that's also integrated into moovel, says Robert Henrich, moovel's CEO. According to mytaxi, "almost every second taxi" in Germany is making trips booked through its app. 

People have varying mobility tastes, Henrich said. A German business traveler likely will rely on taxis, while students are more inclined to make use of moovel's public transportation and bike sharing components. 

Henrich, pointing to RideScout, believes the intermodal mobility strategy can succeed in the U.S. 

"It's very much about exploring new opportunities and leading the market in a new direction. Daimler is an automotive company and will remain to be," Henrich said. "But what we see out there in the world is that in cities and urban areas, there's a new way emerging of how people organize their mobility." 

Ford is conducting 25 experiments this year to further its status as a product and mobility company.

The research is part of the Ford Smart Mobility plan that CEO Mark Fields announced in January during the International CES.

In one test, using golf carts at Georgia Tech in Atlanta, researchers use a remote repositioning system to move carts drone-style from place to place using video streamed via LTE. Ford says the technology could be useful for car-rental companies that need to move vehicles frequently.

In another experiment, Ford is exploring the possibility of minibuses in New York and London that can be summoned with a smartphone app. Each shuttle would serve four to 10 passengers as it "drops off commuters at convenient locations, taking the most suitable route for all passengers on board," according to the company.

"The world is changing. Consumers are shifting priorities. And great technology is evolving faster than ever before," Fields said during his International CES keynote address. "For us, it adds up to an opportunity as big as Henry Ford's. It's an opportunity to help create a better world."

Ford Smart Mobility addresses four major trends: explosive population growth, an expanding middle class, air quality and public health concerns, and changing cus-tomer attitudes and priorities.

The automaker is digging for viable business plans.

"Our first view is that mobility is going to be fundamental to the way the future is organized. So yes, in the long run, we see that as an opportunity," said Eric Wingfield, a Ford mobility strategist, when asked if the company sees a chance to make money in the mobility sector. "Right now we're conducting the experiments we're conducting because we want to learn. We feel we have a significant voice."

Automakers can use the rise of car sharing to their advantage, analysts say, by introducing products to consumers and, by making favorable impressions, perhaps paving the way to sales.

"I think it's something that has a loyalty opportunity," said Xavier Mosquet, North America leader of Boston Consulting Group's Automotive practice.

Ford is using car sharing to make its vehicles more accessible to college students. Ford has been Zipcar's largest university vehicle partner since forming an alliance in 2011 in which Ford vehicles are offered at reduced rates at participating institutions, according to a Zipcar spokeswoman.

Chevrolet sees the Enterprise CarShare program in San Francisco as another way to make inroads in California, a market where it sees room for improvement.

Now consumers don't have to go to dealerships to experience the Cruze, Equinox, Malibu and Sonic, said Dave Barthmuss, GM's West Coast communications group manager.

"If Chevrolet didn't partner with Enterprise, I'm sure somebody else would have. I would rather have them be in our cars than somebody else's cars, especially in California," Barthmuss said. "We don't do as well in California as we do in the rest of the country. It's very important for Chevrolet and all of GM's brands to look for these opportunities to really be in places where people will experience your product and learn more about it."