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Why Investments Increasing in Ride-Hailing Platform Companies? Ridesharing Is a Relatively New Class of Point to Point Transport

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Why Investments Increasing in Ride-Hailing Platform Companies? Ridesharing Is a Relatively New Class of Point to Point Transport Making Car Repair as Easy as Driving Why investments increasing in Ride-Hailing Platform companies? Ridesharing is a relatively new class of point to point transport. Businesses like Uber, as well as its competitors including Lyft and DiDi, operate dynamic digital platforms through which driver who offer their own vehicles are matched with passengers who are seeking to reach a destination. This lowers transaction costs between buyers and sellers helps explain why it is a cost effective method of point to point transport. Taxi cab is a $16B market in USA and about $50B global. Revenue growth has been about 3.3% per year but expected to grow at a much faster rate due to Rideshare (Ride-hailing). While, traditional Taxi service revenue and number of drivers are decreasing Ride-hailing drivers and revenues are growing by a huge number. Uber claims to have about 450K active drivers per month in USA and adding 10% more drives per month. Lyft is spending big again in New York City to beat Uber. Lyft is slashing fares for passengers by 50 percent for all hours between Monday and Friday and is letting drivers keep 100 percent of the tab. The discounts are stepped-up versions of what Lyft has offered in the past as it spends heavily to the tune of $50 million a month nationwide, according to sources — to gain market share against its bigger rival. New York City taxi medallion prices are plummeting as ride sharing takes off in the city. After hitting an all-time high of $1.3 million in April 2013, the price of a taxi medallion has fallen by nearly a quarter of its value to roughly $840,000, according to New York City's TLC (Taxi and Limousine Commission). That drop represents a major turning point for Yellow Cabs—there had never been a price decrease before 2013—and the shift could be tied to the changing nature of transportation in the city. Between 2014 and 2015 number of Medallion Taxi Drivers decreased from 40777 to 38319, whereas ride-hailing drivers increased more than 10% during the same time. Similarly, number of daily average trips for Medallion drivers decreased from 450K to 400K whereas ride-hailing trips increased more than 25% from 42K to 52K. Average occupancy at a given time is about 30%. The story is same in Nevada; according the NV Taxicab Authority between 2015 and 2016 the number of Taxicab trips decreased by 13%. Nevada Taxi Authority April 15 vs April 16 It shows that demand for Rideshare is growing. Drivers are willing to participate in ride-hailing programs and passengers prefer ride-hailing cabs because it provides several benefits. According to Uber, it attracts many full timers and college educated drivers. Hourly earnings seem to be better for Uber drivers compared to Taxi drivers. According to USA Department of Labor Statistics, a Taxi driver makes $13 an hour whereas Uber claims Uber drivers make $19.45 an hour. I think it all depends on how it is calculated. At the end what matters is total earnings after all expenses including car payments, gas, insurance, fees and maintenance costs. Although about 10% new drivers join every month about 30% drivers stop after a few months. Who is investing? The top ride-hailing companies have raised some of the largest mega-deals that private markets have ever seen, in order to finance their fierce competition across the globe. Uber still sits atop the group of most well-financed ride-hailing companies, with $10.61B raised to date. Didi Chuxing ranks second with $4.28B. Lyft comes in third, having raised $2.01B to date. Other than VCs Corporate Ventures and Automakers also want a piece of the pie. Recently Apple invested $1B in Didi. Chinese giants Tencent and Alibaba have invested in both Didi and Lyft. General Motors invested $500 million in Lyft, Toyota just invested an undisclosed though reportedly modest amount in Uber, and VW put $300 million into Gett. After the downturn in 2008, in 2015 new car sales increased to 17+ million, its highest number ever. Automakers anticipate the ride-sharing industry would be the next boom. People may prefer to rideshare rather than owning cars. One option is similar to traditional Taxi operators, rideshare platform operators buy acceptable cars and then qualify drivers to participate in their ride-sharing platform. Other option is instead of selling hundreds of discounted cars to a ride-hailing service, an automaker finances, leases, or rents a new vehicle to a driver. The Toyota deal with Uber actually bakes in the financing, and Uber drivers who get a Toyota vehicle will be able to use their earnings to make payments. This all wouldn't be such an appealing arrangement for traditional automakers if Uber, Lyft, and others didn't need to have their drivers in relatively high-quality, newish cars. A beaten-up Toyota Camry is OK as a New York City yellow cab, but it isn't as an Uber vehicle, which is supposed to provide an environment that's more like a "black car" executive limo. So there you have it. Ride-hailing startups have inadvertently supplied automakers with a magic bullet to change the dynamics of how they do fleet sales. And all the automakers have to do its invest a few hundred million bucks. Sources: Crunchbase, Deloitte, CBInsights, Bure of Labor Statistics, NY TLC, NV Taxi Authority Contact: [email protected] .
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