DETROIT — General Motors and other automakers envision bringing in significant profits from alternative ownership models such as car-sharing and subscription programs. Someday.
But for now, such mobility services are generally big money losers. And executives are increasingly discovering that they don't have the stomachs to let those businesses hemorrhage so much cash while they wait for technology and demand to reach the point where the services help the bottom line instead of hurt it.
GM, after expanding its Maven mobility brand to 17 metropolitan markets in the U.S. and Canada since January 2016, last week announced a "shift in strategy" that included exiting eight U.S. cities to concentrate on areas with "the strongest current demand and growth potential," the company said.
The pullback is the latest example of the balancing act automakers face between spending on unproven business models based on emerging technologies and reinvesting in their profitable primary business, manufacturing and selling vehicles.
"Alternative ownership, ride-hailing and car-sharing is still the Wild West," IHS Markit principal automotive analyst Stephanie Brinley said. "The opportunity for mobility services to generate revenue is there, and it's true, but getting from here to there is messy. And the scale, we don't fully know."
While Maven and other mobility operations have been hailed by Wall Street for their profit potential, automakers that have hedged their bets through broad strategies are having to better prioritize where profits should be reinvested as they brace for slowing vehicle sales and a potential economic downturn.
In GM's case, autonomous and electrified vehicle technologies — also highly unprofitable for now — appear to be a higher priority than alternative ownership models, in part because they can support mobility businesses later.
Automakers refining or even ending operations such as Maven shouldn't be considered an "automatic failure," Brinley said. It's about learning the business models and the habits of consumers, many of whom are trying to figure out what might make sense for them.
"If you don't explore it or have pilot programs," she said, "then you won't understand the business model if or when it does build into something more, but it does cost a company to have those learnings."