Will go far: why the transport sharing market is interesting for investors

Over ten years, investments in transport sharing market players have exceeded $100 billion. Automakers accounted for only 4% of this amount. Market prospects are huge. In addition, it can be greatly transformed by the development of drones,

Five facts about the transport sharing market that may surprise you.

Every day, people order more than 40 million trips on the two largest electronic platforms for calling a taxi. The majority (90%) of consumer spending on shared transport globally is for electronic taxi services. Judging by the number of trips, electronic taxi calling services have almost tripled in popularity in four years, and micromobility tools have more than doubled in just one year. The share of automakers in total investment in shared vehicles is only 5%. More than 60% of consumers are willing to share a ride with a stranger if the cost of doing so decreases and travel time increases by less than 15%, according to a McKinsey survey in 2020. Seven modes of shared transportation

We distinguish seven segments in the transport sharing market*.

1. Online services for ordering a taxi

Users of electronic taxi ordering services can call a car at the desired address using a mobile application or smartphone. The driver arrives for the passenger and takes him to his destination, and in some regions such activities do not even require a license.

2. Shuttle transportation (performed along the same routes) and taxi sharing through online services

Users call the car from a mobile device and make trips together with other passengers. The driver picks up passengers at certain points on the route and takes them to the drop-off points along the route.

3. Car sharing

The company provides customers with cars for a shorter time than with conventional rentals. As a rule, the service is provided within a limited area. There are two models of sharing - with rental stations (when the car needs to be returned to a certain place) and without them (when the car can be taken at any point and left anywhere).

4. Rent and share private cars

The owner of the car, for a fee, provides his vehicle to other drivers. In the second model, the car owner takes fellow travelers with him for a fee. Usually such trips are made over long distances.

5. Sharing of micromobility facilities

Very light vehicles, in particular bicycles and scooters, which anyone can rent for a fee. Two rental models are used - with stations and without them.

6. Air transport

Flying taxis (either powered by electricity or new energy sources) transport people by air between special sites. Flights are made under the control of pilots or in a semi-autonomous mode.

7. Taxi robots and shuttles

Taxi robots and shuttles solve the same tasks as modern electronic and conventional taxi ordering services, but instead of a human driver, they use unmanned driving technologies. Many companies, including start-ups, invest in research and development of such solutions, not only in the automotive industry, but also in industries such as the transport sector, high technology, software development, etc. Today, 40-50% of the amount that passengers give for a trip is the driver's salary.

What is the transport sharing market

In 2019, the volume of the global transport sharing market reached $130-$140 billion. This is the amount of consumer spending for these purposes on an international scale. The largest share - more than 90%, or from $120 billion to $130 billion - came from online taxi ordering services.

Car sharing and car rental from individuals together account for less than 10% of the market. This means that it is more convenient for people to use online services. Customers of such services can go about their business during the trip and can be relieved of the need to look for parking.

Photo: RBC

The infographic shows that in 2016-2019, the transport sharing market was clearly dominated by electronic taxi ordering services: in these four years, the number of trips tripled.

Micromobility rentals have shown even stronger momentum: until 2017, electric scooter rental services were almost invisible in the market, but in 2018 and 2019, the development of this category accelerated strongly. Thus, until 2017, customers of the largest players in this segment made less than 1 million trips annually, and in 2019 this figure exceeded 160 million. reach $300-500 billion. This is three to four times the current size of the market for electronic taxi ordering services. As the pandemic subsides and business returns to normal, the figure could rise even more significantly.

Photo: RBC

Photo: RBC

Which segments attract investors

Since 2010, the volume of investments in the transport sharing market players has exceeded $100 billion. Upon closer examination, it turns out that car manufacturers are by no means the most actively investing in these players. Since 2010, approximately 72% of the total investments that are publicly known have been in private equity and venture capital investments. This means that the focus is not on established and already sustainable business models, but on promising areas. Technology companies are in second place in terms of investment volume - their share reaches 21%. Automakers' investment is only 4%.

Photo: RBC

Photo: RBC

One reason for the reticence that traditional automotive players have shown on this issue may be due to the fact that shared transportation threatens to undermine their core business. Some automakers have tried to respond to this challenge by launching their own projects rather than investing in third-party new firms. This means that their way of thinking is changing: if before they only wanted to sell cars, now they are thinking about providing services in the transport sharing market - even though this new direction may greatly crowd out their main business of selling cars to individuals.

Online services for ordering a taxi

The volume of investments in the development of electronic services for ordering a taxi exceeds $95 billion. About half of this amount falls on the three largest international market players. The main business model of market participants involves gaining access to drivers and customers (without the use of assets), and by no means the formation of taxi fleets and the operation of vehicles. And it seems that investors like this approach. However, for them it is a bet on the future. One of the factors that can radically transform the market for online taxi ordering services may be the development of taxi robots and shuttles. This is because their operating costs are likely to be lower than those for driver-assisted services. Investors are waiting for the moment

Bicycles and scooters

The micromobility sharing market continues to grow and investment activity accelerates rapidly. Electric scooter rental services entered markets in a big way only in 2017, but micromobility service providers have already raised more than $9 billion. In this regard, they are only ahead of the players in the taxi e-services sector.

car sharing

But investments in the carsharing market are rather small when compared with investments in electronic taxi ordering services. Their volume is about $ 3 billion. On the one hand, some automakers are developing car sharing services on their own - they form their own fleet of cars, gaining advantages in terms of operating costs. On the other hand, a smaller volume of investments reflects the peculiarities of the market development.

The number of trips in the car sharing segment remained relatively small, but people began to use online taxi ordering services almost three times more often. In addition, the number of trips on electric scooters has increased many times over. This means that the expansion of enterprises with few assets (be it micromobility services, electronic taxi services, etc.) requires a much more modest investment than with a large amount of assets (typical, for example, for car sharing services).

Such dynamics also points to some problems that are well known to consumers of car sharing services, but do not arise when ordering a taxi online. In particular, the client has to independently drive a car in traffic jams, determine the location of the vehicle and go to it, and also look for parking at the destination.

Air Transport

The fastest acceleration in investment activity is observed in the segment of promising means of air mobility, especially flying taxis: over the past two or three years, there has been a sharp rise here, and the total volume of investments as of June 2021 exceeded $ 8 billion. Moreover, this capital is more concentrated in in the hands of just a few players, so they may well be financially able to bring innovative air transport projects to life over the next ten years.

Some major market players have already surpassed traditional car companies in terms of valuation. The companies leading the world market of online taxi ordering services are ranked highest today. They do not lag behind the largest automakers and even surpass the long-established auto companies in Germany in terms of market capitalization. The valuations of micromobility rental companies are much lower, but they are growing at a rapid pace, with some firms surpassing the $1 billion milestone in a matter of years.

Who are the consumers

The most popular mode of transport in almost all countries remains private cars. According to an international survey, 67% of respondents use private cars at least once a week, and 38% use public transport. On average, carsharing is the least popular among consumers, as evidenced by the relatively small number of trips in this segment. In Brazil, CHINA and the United States , electronic taxi ordering services are most in demand. For example, in China, these services are used at least weekly by 90% of the surveyed consumers.

Survey participants noted that they travel by shared transport primarily because it is very convenient. That is why the market today is dominated by online taxi services. The characteristics of shared transportation that matter most to consumers are competitive price, physical accessibility, and safety (the latter is likely because our end-2020 survey was impacted by the covid-19 pandemic ). In particular, physical accessibility can be one of the important pushes for private car owners to opt for shared transportation over the long term. For example, in Germany, consumers consider this feature to be the most important.

When considering the most important transportation use case, travel from suburban areas to cities and back again, in such cases, people in general, especially in the United States, prefer private cars. In China, the share of such consumers is relatively small, most likely due to the uneven distribution of personal cars among the population. If all modes of transport were available to everyone, 33% of Chinese respondents would prefer to share transport between suburban areas and cities. Personal vehicles in these statistics would be in second place.

Speaking about promising modes of transport, survey participants noted that they are not opposed to using taxi robots. At the same time, more than half are ready to hand over their personal car under the trade-in program for this, and 7% are even willing to bear higher costs than when owning their own car. Respondents in Brazil and China were the most willing to switch to robotic taxis and shuttles in the future.

Consumers are also showing interest in flying taxis, mainly because such transport will allow them to reduce travel time.

Development Forecast

Our forecast until the end of 2030 is that when new modes of mobility, such as robotic taxis or flying taxis, really enter our lives, the market potential of other types of shared transport will shrink and change significantly, or at least remain stable. This will depend on how the regulatory framework evolves—for example, cities may impose restrictions on private car ownership or otherwise deprive owners of incentives. Advances in technology will also play an important role, in particular the readiness of self-driving technology. Finally, a significant factor will be how consumers will accept various innovations.