What the Growth of Ridesharing Means for the Connected Car Industry

August 19, 2015  |  By Michael O'Shea  |       

ridesharing-apps-connected-carJust over 11 million people in the United States participate in ridesharing -- typically via services such as SideCar, Uber or Lyft -- according to the 2015 Smart Mobility Research Report. And, an estimated 19 million more commuters in metro areas could switch to ridesharing in the coming years. With this sudden resurgence in the age-old idea of carpooling, car ownership is becoming less appealing, especially for consumers under 30. But is ridesharing really a threat to auto sales?

Here’s what the growth of ridesharing means for the connected car industry:

The Shift From Cars to Services

With the surge in ridesharing, automakers have to find ways to ensure that vehicle ownership continues to be valuable and exciting to consumers in the short term. This means anticipating customers’ needs and offering services that make owning a connected car something they can’t live without. In the longer term automakers must position themselves to be central to the ridesharing economy by providing products and services specifically tailored for it.

In early 2015, Ford President and CEO Mark Fields alluded to this when he remarked, “At Ford, we view ourselves as both a mobility and an auto company.” While this may be a surprising statement to some, it’s indicative of an important shift in the automotive industry. As IA Magazine explains, “the company is no longer just selling a car, but rather a long set of services designed to maintain a relationship with an individual driver.” These services may include mobility, connectivity, and self-driving capabilities.

Illumination of Benefits

While ridesharing could have negative effects on car sales, it could also illuminate many of the benefits of connected cars -- therefore making them more appealing to rideshare companies and drivers. The car purchasers of the future will not be typical consumers; rather, cars will be purchased and operated by ridesharing and carsharing companies.

One of the benefits connected cars bring to light for these companies is crash detection notification. For example, if a Lyft driver is involved in an accident, their connected car would send an automatic notification and then Lyft would contact the driver and/or rider to ensure support is on the way.

Another benefit of connected cars is savings on insurance premiums for consumers. The car monitors driving behavior and the insurance company provides discounts for safe driving and lower mileage based on that data. Using this same model, a rideshare company could save money through more accurate insurance policy pricing for their drivers. A third benefit is service support. Through the data connected cars collect, rideshare firms can help their drivers get better pricing on repair and maintenance services.

A Symbiotic Relationship

In some ways, ridesharing and connected cars will grow together. As noted in Digitalist Magazine, “Car sharing, through car clubs run by rental companies or peer-to-peer services, will be far easier when communication between vehicles and potential passengers is seamless, and any car can be accessed and operated securely by any smartphone.”

OEMs can use this symbiotic relationship to their advantage. Ford, as part of its aforementioned “smart mobility” movement, is experimenting with a ridesharing model called Dynamic Social Shuttle. Similar to today’s popular ridesharing apps, consumers request this on-demand ride service via smartphone. The difference between this and something like Lyft is that a Ford premium mini-bus, rather than an everyday driver, would transport passengers. Ford’s model is one way automakers can get directly involved in -- and have some degree of control over -- the ridesharing trend.

The Rise of Autonomous Vehicles

Ultimately, it’s not ridesharing that will be transformative for the automotive industry -- but it very well could be autonomous vehicles. The popularity of ridesharing apps already confirms that many consumers are quick to embrace a more economical alternative to vehicle ownership. Combine ridesharing/car sharing with self-driving vehicles, and you have a situation that could radically alter the social and economic landscape.

Think of it this way: Why buy a car and deal with everything that goes along with car ownership -- fuel, insurance, maintenance -- when you can simply order a driverless vehicle or shuttle to pick you up anytime you need it? That’s the question many consumers may soon be asking themselves, and it’s one the automotive and connected car industries absolutely must anticipate as they plan for the future.

Topics: Connected Car - Other

Michael O'Shea

Michael O’Shea is the Founder and CEO of Abalta Technologies. He is responsible for all aspects of executive management of Abalta and a direct participant in many client engagements, particularly in management advisory projects.

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