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23 March 2018

GM to test ride-sharing waters with Maven

General Motors is preparing to launch a pilot ridesharing program this summer, according to Bloomberg. Using its Maven unit, dedicated to exploring car-sharing opportunities, GM will be selecting vehicle owners and offering them the chance to add their cars to the Maven platform – where they can be rented by other users in exchange for cash.

The unit will explore customer reactions to the program, with the aim of launching the project as a standalone business. For GM, such a move is intended to secure service revenues instead of relying solely on car sales – as that market is getting more uncertain in developed economies, hampered by looming legislation and the rise of EVs and ride-sharing services like Uber and Lyft.

Chief rival Ford is pulling similar moves, as the automakers collectively react to the encroachment on their turf of the Silicon Valley players. Offering more services helps to secure recurring revenue, and retaining ownership of the vehicles lets them resell a car into another market, rather than lose that opportunity to the second-hand dealers. Essentially, the automakers are looking to extract more dollars from each vehicle they build, and keeping them in-house is key to this.

Maven is slightly different, however. The goal is to offer the peer-to-peer service to all car owners, not just GM ones. This is a sensible choice from GM, as lock-in would inherently limit the size of its potential fleet. More interestingly, it means that GM could generate revenue from a fleet that doesn’t contain a single GM car – purely as a service provider.

Maven isn’t the only player in this space. Two startups, called Turo and Getaround, are active here, and Daimler has both partnered with Via and acquired Flinc to explore ridesharing. Tesla has also talked about offering this service to Tesla buyers, even going as far as saying it could generate enough cash to pay for the finance package used to buy the car in the first place.

“You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you’re at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost,” said CEO Elon Musk. “This dramatically lowers the true cost of ownership to the point where almost anyone could own a Tesla.”

But there is a lot of work to do, if Maven is to be a success. Many consumers will like the idea of renting out their cars until the day it comes back with cheese smeared into the upholstery, or coffee spilled inside the handbrake cover. An odd smell might be all that is needed to convince the owner to never rent the car again, as they are met with the sudden realization that the abstract dollar amounts made through rental are met tangibly via stains or strange scents.

Similarly, the users wanting to rent vehicles will probably want to rent newer cars with nice clean interiors, and it isn’t clear how Maven intends to ensure that cars are delivered and returned in such a fashion. User feedback or penalties seem most likely, but immediately complicates the transaction.

It seems likely that Maven will implement some form of minimum requirement for the vehicles, examples of which might be number of seats and age of vehicle. This should help improve the quality of the pool of cars available, but there will be many users that might happily drive a ten or twenty-year-old car if it were offered at a discount.

But perhaps the biggest hurdle will be the insurance providers. Maven itself will be able to purchase operating insurance, but for individual car owners that want to take part in the ride-sharing scheme, it seems that finding an insurance policy that would allow such sharing will be complicated. The increase in premium might also negate the benefit of sharing the car in the first place.

One solution to that problem would be for the automakers themselves to bundle insurance in with a finance package used to purchase the car. Similarly, the next evolution would also pick up the taxes and licenses too, so that all a buyer might need to add is the fuel. Renault has explored this plan, but should such bundling become common, it is not a leap to move entirely to a subscription model.

The next evolution of this will move to a model where the user no longer owns the vehicle itself. Riot has called this Vehicle-as-a-Service (VaaS), and explored it in a previous paper. With a bundled subscription, the automaker can rely on retaining ownership of the car, selling it on when it has fulfilled its purpose in the VaaS fleet. GM will look to build on its Cruise Automation wing, which is working on autonomous vehicles, as well as its $500m investment in Lyft.

Purchasing insurance or negotiating tax payments for an entire fleet might also provide significant economies of scale, and the internet connectivity in the vehicles can be used to backhaul telematics data that can provide predictive maintenance capabilities – to lower the fleet support costs. Similarly, refueling might be cheaper when purchasing at scale, although this might be a moot point if EVs form a large enough percentage of the fleet.

However, bringing all these service components in-house could have a damaging effect on the wider peripheral industries. The demand for parts and maintenance services from third-party suppliers could fall dramatically, and even if the automakers contract out their fleet service work, it seems unlikely that smaller independent firms are going to win those bids. Such a change isn’t going to happen overnight, but the advance of VaaS should have a dramatic consolidation effect on the aftermarket suppliers.