The growth of ridehailing is definitely on the radar of automakers who see the phenomenon cutting into auto sales. The latest companies to throw in and invest are BMW AG and Daimler who are combining for a joint venture funded by $1.1 billion to compete with Uber, Lyft and other such firms.
The venture, announced on February 22, also includes joint ownership of electric-car charging stations and car-sharing pilots.
Both companies had been pursuing ventures on their own, but now see the wisdom and cost-savings of throwing in together. Daimler's Car2Gocar-sharing brand will be combined with BMW's services. DriveNow, ParkNow and ChargeNow and ShareNow businesses, with both carmakers holding 50 percent stake in the venture.
REACH NOW is a smartphone-based route management and booking service. CHARGE NOW is for electric car charging. FREE NOW is a taxi ride-hailing, PARK NOW is for parking services and SHARE NOW for car-sharing.
"These five services will merge ever more closely to form a single mobility service portfolio with an all-electric, self-driving fleet of vehicles that charge and park autonomously," said BMW Chief Executive Harald Krueger.
Both companies are also working on their own autonomous-driving technology. Car companies are increasingly aligning with competitors to share development costs on the new tech. Ford and Volkswagen, for example, have an extensive alliance underway. Mercedes and Renault also have an alliance, in addition to Renault's alliance with Nissan.
In Seattle, for example, car ownership started to decline beginning in 2010 for the first time since the 1970s. By 2015, that decline was almost exclusively due to millennials. With improved public transportation, Lyft, and Uber, car ownership isn’t as essential or necessary as it once was. That’s worrying automakers, as the trend is seen in other cities as well.
While upstarts like Uber and Lyft have completely disrupted the taxi business worldwide, car companies are grappling with how this trend, especially as it impacts younger drivers, and how it will impact the future of car sales. Daimler and BMW, like other carmakers, still make their money selling vehicles and financing them. Younger consumers are increasingly choosing to forgo car ownership when they can, relying on car-sharing and car-hailing instead, especially in and around cities that have mass transit and alternative mobility options.
Car companies that own the services or have substantial stakes in them can treat them like captive customers, supplying them with vehicles.
This is not a new strategy. For many years, Ford, General Motors and Chrysler had controlling stakes or ownership of rental car agencies like Hertz (Ford), Avis (GM) and Thrifty (Chrysler). The car companies would pump excess production into those fleets. They all sold off those stakes.