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Vertical Integration Among Carmakers and Mobility Services
April 2018

The parallel shifts from car ownership to mobility on demand, and from individual to shared mobility are no longer challenged. Automotive incumbents have been testing different business models, e.g. car-sharing and subscription models, in order to morph into mobility providers. They are also building in-house mobility businesses as well as partnering with new operators. Meanwhile, ride-hailing companies are grabbing an increasing share of the mobility budget at the expense of OEMs and public transport operators. These new players are now looking for ways to get a handle on vehicle specification and sourcing through various partnerships or investments. Newer companies are still emerging between the former and the latter, some of which with the intention to address both the vehicle and the mobility service. This article analyses how our mobility ecosystem is getting more vertically integrated between hardware and services.



Carmakers expanding downstream to mobility services

OEMs are developing in-house mobility services as well as partnering with — and in some cases investing in — mobility startups. Daimler was the first OEM to introduce a car-sharing solution in 2009. Now most OEMs have established a “mobility division” to expand their scope to a B2C service business. They follow different development patterns. Yet, pretty much all are heading towards generating revenue from the actual mobility service, i.e. passenger-kilometers, rather than from simply selling cars, financial services and parts.


The largest ride sharing players, namely Didi and Uber, have built massive operations (more on this below). OEMs now need to quickly scale in order to have an impact. Daimler’s 9 year-old Car2Go car sharing platform (3m+ users), is merging with BMW’s DriveNow (1m+ users) into a 50-50 JV in order to counter the ride-hailing giants’ growing footprint. But Daimler is also playing with these companies. In Jan 2017, the OEM announced a partnership with Uber to introduce their own self-driving cars in the ride-hailing fleet. Daimler has also invested in ride-hailing startups Careem (Dubai) and Via (USA). BMW invested in 2016 in fleet management startup RideCell and earlier this year in autonomous shuttle startup May Mobility


The VW Group has not yet established any mobility service operations. However, the company invested $300 million in US ride sharing startup Gett in 2016 though it did not follow on in the 2017 funding rounding, apparently favoring Moia, VW’s in-house mobility division. VW also signed a cooperation framework with Uber in Nov 2016. However, talks stopped as VW would not settle for a mere supplier role, preferring a comprehensive mobility service play. They will start a ride-sharing service with their own vans in Hamburg later this year, with the objective to become one of the world’s Top 3 mobility providers within the next few years. 

Carmakers and Mobility Operators Expanding their Value Chains 


GM is developing its own mobility service with Maven. However, the OEM is also partnering with established mobility players. The company invested $500m in Lyft in Jan 2016, with the aim to jointly develop a network of on-demand autonomous vehicles and to provide short-term vehicle rentals for Lyft drivers. GM also partnered with Uber with both a lease agreement for its drivers, and a plan to introduce autonomous vehicles in Uber’s San Francisco fleet through GM’s Cruise division.


Ford recognized the need to morph from a carmaker to a mobility operator in the late 2000s. Yet not much has happened until a couple of years ago. The OEM created Smart Mobility, a separate entity focused on developing software, tech services, and business models related to transportation. Ford piloted a free float car sharing service in London in 2015-2016, which did not result in any deployment. In 2016, the company bought Charriot, a van-based ride sharing startup operating with fixed stops. Like other OEMs, Ford also is also collaborating with Lyft to deploy autonomous vehicles in “large numbers” on the platform by 2021.

PSA (Peugeot, Citroën, Opel, Vauxhall) was probably the first OEM to offer a subscription model. Back in the 2000s, the “Mu” program allowed monthly subscribers to choose from a selection of cars and 2 wheelers for a fixed fee. PSA offers free float car sharing services in several European cities under the brands Multicity and Emov. PSA also introduced Free2Move, a mobility aggregator with over 400k subscribers in Europe — the platform arrived in the USA in late 2017.  Among the 30 or so services providers offered are ZipCar, Car2Go, TravelCar as well as 2 wheel providers. PSA also invested in several car sharing operators, e.g. KooliCar, Communauto, TravelCar and CarJump.


None of the Renault/Nissan/Mitsubishi Alliance members offer any sort of mobility service today. A division called Alliance Connected vehicle and Mobility Services (ACMS) was created in 2016, but the focus seems to be on the software rather on actual mobility services. Nevertheless, Nissan will test an autonomous ride-hailing service on public roads in Japan in 2018, aiming to start robotaxi rides in the early 2020s. Renault is expected to start a similar service in France later this year in partnership with multimodal mobility operator Transdev.

Toyota is somewhat behind in the mobility service game. In 2016, the OEM signed an investment and car leasing deal with Uber. The partnership scope was later extended to include data sharing and the development of self-driving vehicles for ride hailing and parcel delivery. Last year, the OEM invested in South East Asian ride sharing startup Grab, with an agreement to record and analyze driving patterns in 100 cars in Singapore. Earlier this year, Toyota also announced a more ambitious project with ePalette, a multipurpose autonomous vehicle the company plans to operate starting in the mid-2020s, and invested in autonomous shuttle startup May Mobility.


A few Tier 1 suppliers are also taking part in emerging mobility services. Valeo and Continental invested respectively in Navya and Easymile, the two most mature startups providing autonomous shuttle systems, both based in France (more below). 


Navya's Autonom automated shuttle


Mobility operators partnering upstreams with OEMs and tech companies

The largest ride hailing companies, mainly Didi, Uber and Lyft are investing heavily in autonomous driving tech as an opportunity to drastically reduce operating costs. As ride sharing gains momentum, it will be increasingly important for these players to specify vehicles for particular use cases and to partner with companies capable to build them. 


Uber, with about 10m daily rides, has been partnering with Volvo for several years, though the OEM’s vehicles have been merely used as development mules. In late 2017, Uber signed a frame contract to buy 24k XC90s which are expected to join its fleet starting in 2019. Since then, Uber sold the 30k vehicles it owned and leased to its drivers, as the fleet had turned into a major money losing venture. The buyer, car sharing startup Fair, then became Uber’s exclusive leasing partner. Uber is also investing a lot in the development of its own autonomous driving tech which we can expect will find its way in partner OEMs.


Didi, the largest ride sharing operator with about 25+m daily rides, has established Didi Auto Alliance, a.k.a. D-Alliance, which aims at becoming a provider of transportation solutions (incl leasing, sales, services, car sharing ...). To this end, the company is getting involved in the design and manufacturing of purpose built vehicles. The D-Alliance has already partnered with Chinese OEMs BAIC, BYD, FAW or GAC and more recently Renault-Nissan-Mitsubishi. In addition, Didi invested in Chinese OEM GAC and just set up a majority owned electric vehicle joint venture with CHJ Automotive, a Chinese startup founded in 2015 and which recently raised $500m. The JV plans to produce urban EVs starting in 2020. The mobility giant also expects to have 1m EVs in its network by 2020 — they had 260k EVs as of Nov 2017 among about 4m drivers. Just like Uber, Didi is also investing increasingly in autonomous driving tech.


Lyft, with 1m+ daily rides, expanded heavily its web of hardware and tech partners over the past few months: GM/Cruise, Ford, Delphi/nuTonomy, Waymo and JLR will test their vehicles on the Lyft platform. Just last month, automotive supplier (and car assembler, more that below) Magna invested $200m in Lyft with a hardware partnership in mind — more below. Similarly to Uber and Didi, Lyft is investing heavily in autonomous driving tech through Level 5, its in-house AV development center.


Waymo has been partnering for several years with FCA, which provides minivans for the development of its autonomous driving solution. The Google unit is now building momentum towards operating autonomous ride-hailing service, for which they will need various types of vehicles. Last month, a deal with JLR to source up to 20k Jaguar I-Pace EVs by 2022 was announced. After a couple years of talks, Waymo even more recently announced a partnership with Honda to develop a car from ground up for the purpose of carrying goods.



White label manufacturing and operating platforms

Ride sharing, car sharing, as well autonomous delivery services, will need purpose-designed vehicles for various use cases. White label vehicle assemblers potentially have a major role to play as incumbent OEMs will favor their own mobility services.


Magna has the ideal expertise to become the Foxconn of the automotive space. The company already produce about 200k vehicles per year for OEMs such as Mercedes, Jaguar (e.g. the recent I-Pace) or BMW, in addition to being a large Tier 1 supplier. Magna invested $200 million in Lyft to co-develop a self-driving system for light vehicles; Lyft will develop the software while Magna will manufacture and integrate the platform into vehicles. The end game is without doubt to secure the provision of vehicles for Lyft’s fleet. Magna will be careful not to be at odds with its all important customers, the OEMs.


Open Motors, a young startup based Silicon Valley, has been developing a highly modular and upgradable platform which can used for various ride / car sharing fleets in the future. Similarly, recently established Evelozcity plans to build connected EVs with an urban focus, apparently as a white brand. In addition, OEMs with low brand value (e.g. within the FCA group) could eventually manufacture under contract in a world where mass private ownership fades away.


Navya and EasyMile, mentioned above, have designed autonomous electric shuttles and the underlying platform to operate them, the complete system being deployed by mobility operators. Established more recently, NEXT Future Transportation and May Mobility have been following the same model, the former with a very innovative pod concept.


A new vertically integrated player with a big ambition

A new kind of player has emerged from this trend towards vertical integration between vehicle manufacturing and mobility services: Zoox. The two year-old startup covers (both electric and autonomous) vehicle design, fleet management and ride-hailing operation, thus competing with  both OEMs and ride-hailing companies. Based in Silicon Valley, the very ambitious Zoox has already raised $290m at a valuation of $1.6 bn. Zoox plans to introduce a ride sharing service with its own vehicles in a major US city in 2020.



The need for incumbent OEMs to engage in mobility services on one side, and for new mobility players to get involved in specifying / sourcing their vehicles on the other, results in deep corporate transformation and multiple strategic partnerships. The search for recurring revenue from mobility services as well as for lower operating costs will continue to drive both sides to some sort of loose, vertical integration. OEMs need to quickly scale their contribution to mobility services if they are to avoid becoming contract manufacturers, though it may be a good strategy for some.

Marc Amblard

Managing Director, Orsay Consulting

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