The Future of Personal Transportation Will Be Shared (Part 3)

ridesharing-van

In the future, every car is going to be part of the future personal transportation service. If there’s a vehicle with available empty seats going to same direction than you are, the chances are that you’ll get onboard with that car. Things are changing – the younger generation no longer sees owning a BMW as something cool, but however, getting from place A to B with just a few clicks on your iPhone is something they want. There are already several startups offering services to get you from A to B but they are struggling with various problems, and to be honest, the current services are not yet truly disruptive either. Yet based on the initial success of these services one may be assured that there is also a true revolution in the personal transportation coming up. Strong resistance from the traditional taxi companies and taxi associations is only one proof of that. 

In my previous posts, both the key problems and solutions of the existing Black Car and Community Driver services were discussed. Now it’s time to see how they actually would work.

Let’s get back to the original problem. People want to get from place A to B as easily as possible. Time is money so riding all day is not an option, but still the cost of the trip is one of the key factors to consider in order to expand the utilization of these services. Just lowering the prices is not going to work as soon nobody would be driving these vehicles. Self-driving cars may solve this problem one day but not quite yet. The solution is to utilize better the existing seat capacity in the vehicles by means of the ridesharing. And the same principle will apply even when drivers are no longer needed as there are, after all, too many vehicles in many cities in the world on the roads already and the seat utilization is going to be more and more important part of the solution.

A bit longer ride but a lot more affordable

So how would this work from the end user’s point of view when using a transportation service? The smartphone app would simply have an additional “ridesharing” option which the user (passenger-to-be) can select while ordering the trip. The vehicle chosen by the system could be a car already going into same direction with another passenger. Or, it could be an empty car which will pick up another passenger along the route. Instead of the usual pickup in for example 10 minutes the vehicle may arrive in 20 minutes and the trip may take a bit longer than a direct route would take. For example, if the direct route from A to B would be 20 minutes, the shared ride might take 30 minutes. You could also order a trip based on the latest arrival time in the destination, a handy way to to ensure you don’t get  there late even in case of ridesharing.

In exchange for an opportunity of chatting with somebody (who actually might be your Facebook or LinkedIn contact) you’d be saving money. Instead of non-shared price of (for example) $27 you might be paying only $15. And best of all, the driver could be earning more than what he had made otherwise. You might also meet new faces, and experience life in a totally new way. True win-win for all the parties, and a cure for the driver problem as well.

Every car is part of the personal transportation network

Ridesharing as an integrated part of those transportation services where another person is your private driver is just the beginning of the new era in the personal transportation. The next obvious step would be expanding the concept to every other vehicle moving on the road. It’s likely that increasing taxation on the vehicle usage will motivate even those driving with their own car to take passengers along the route – as long as the trip duration of the driver (who owns the car, after all, and can therefore get some benefits…) is not extended too much. Maybe the tax man will get really innovative and taxes will be higher for those not participating these new personal transportation service concepts. You can think about this as a huge system where the destination of every car is known in advance. You’ll be matched to such a vehicle which fits not only your destination but may also matches your social profile (Facebook, for example) – especially in case of carpooling.

Finally, real-time carpooling for commuting and and any other personal transportation need becomes a reality. And you no longer book “a carpool trip” with your mobile phone but you rather indicate with your smartphone a desire to get somewhere. Carpooling with somebody will likely to be the cheapest travel option but in order to ensure you always get to your destination, the other alternate transportation services (taxi-sharing and taxi) will be needed to offer you this guaranteed ride. Otherwise you might still need your own car. But who will own those private cars with whom can you carpool? If driving your own car requires you to be wealthy, will they take you as a passenger? Whether the future is not changing that fast is yet to be found out.

But who’s has a chance to be the Black Swan of the future personal transportation services? Read about that in my next post.

The Future of Personal Transportation Will Be Shared (Part 2)

share_rideIn the future, every car is going to be part of the future personal transportation service. If there’s a vehicle with available empty seats going to same direction than you are, the chances are that you’ll get onboard with that car. Things are changing – the younger generation no longer sees owning a BMW as something cool, but however, getting from place A to B with just a few clicks on your iPhone is something they want. There are already several startups offering services to get you from A to B but they are struggling with various problems, and to be honest, the current services are not yet truly disruptive either. Yet based on the initial success of these services one may be assured that there is also a true revolution in the personal transportation coming up. Strong resistance from the traditional taxi companies and taxi associations is only one proof of that. This blog post is the first one in series of blog posts discussing the evolution in the personal transportation market.

In my previous post, the key problems of existing Black Car and Community Driver services were discussed. Now it’s time to consider the solutions.

The solution is simple. Let’s integrate a really smart ridesharing backend to these services. This is the answer to the challenges related to demand, supply, pricing and quality. Even though some of these startups already call themselves as “ridesharing services”, they are actually not. In my opinion, ridesharing means a service where the ride is shared by people all traveling from different addresses. So taking two persons from A to B by a community-driver is not ridesharing in that sense, but simply a taxi trip driven by a driver. And whether this driver is a professional driver or community-driver does not really make a difference.

What’s true ridesharing like?

In true ridesharing model the vehicle (car, van, minibus) is picking up and dropping off passengers in such an order that nobody needs to take too long extra ride because of other passengers. But at any time there may be one or more other passengers in the car. In the real-time ridesharing service people wanting to get a ride are matched in real-time to any suitable vehicle already in motion, but carefully avoiding not extending the trip duration of those people in the vehicle already too much.

The technological solution to the ridesharing may come from a rather surprising direction. There are thousands of vehicles in the US alone being part of real-time ridesharing services right now, taking huge number of people from place A to B every day. Some of these systems are quite advanced: trips can be ordered at the last minute, passenger is promised rather small pickup window (15 minutes) and the promised trip travel time is kept as good as possible. As the passengers may sometimes be late, or not show up at all, and the traffic may cause extra delays, the system is continuously optimizing everything in order to enable the service operator to make the maximum profit while keeping the trip “quality” promise given to every customer. Where are these services and who are using these services? These services are actually those operated under the ADA regulation (Americans with Disabilities Act) in the US. It says that transit authorities must provide comparable paratransit or other special transportation services to individuals with disabilities who cannot use fixed route bus services, unless an undue burden would result. In many cases the most cost-efficient means of arranging this is with demand-responsive transportation (DRT) service. Some of these services are really advanced. You can book a ride with relatively short notice if you like, the promised pick-up window is only 15 minutes and your trip is not extended more than certain extra duration. Most of the orders are made with a telephone call, but there are really no reasons why the booking could not be done with a smart phone or a web service. The magic behind the curtains is the full-automatic real-time matching and an optimization software that requires no human intervention. Not all the paratransit services are this good yet, but number of those is increasing every month. The state of Pennsylvania is showing good example and has successfully implemented large number of advanced DRT systems already.

Introducing Economy Class of personal transportation

So what happens when the companies in this field will implement true ridesharing? People will use their iPhone just like now to order a trip. But instead of having only one option available (the current “ride alone” option) there will be another option available, “ridesharing”. Another way to call these two travel classes would be to call them “Business Class” and “Economy Class”. In the business class you travel with more comfort while in the economy class you give up some comfort for substantial savings in the ticket cost. The difference being of course that unlike in the air travel, in ridesharing the trip duration for economy class may be a bit longer than in the business class.

So how would it actually work? Read more about that in my next blog post.

The Future of Personal Transportation Will Be Shared (Part 1)

Black Car

In the future, every car is going to be part of the future personal transportation service. If there’s a vehicle with available empty seats going to same direction than you are, the chances are that you’ll get onboard with that car. Things are changing – the younger generation no longer sees owning a BMW as something cool, but however, getting from place A to B with just a few clicks on your iPhone is something they want. There are already several startups offering services to get you from A to B but they are struggling with various problems, and to be honest, the current services are not yet truly disruptive either. Yet based on the initial success of these services one may be assured that there is also a true revolution in the personal transportation coming up. Strong resistance from the traditional taxi companies and taxi associations is only one proof of that. This blog post is the first one in series of blog posts discussing the evolution in the personal transportation market.

This currently ongoing change in the mind setting of people no longer valuing owning a car so much means there is a huge opportunity fulfilling the need to get around. And where there is an opportunity, there are startups aiming to give the best solution for the problem. Currently there are two principal ideas on the market to solve this problem: using professional drivers with a nice black cars or not using professional drivers but letting anybody in your neighborhood take you there with his own car.

Drivers want to earn more, not less

In some of the black car services the pricing depends on supply and demand of trips that particular moment (i.e. “Surge Pricing”). It’s a good model in the sense that it enables the drivers to earn more, even after possibly a heavy middle-man commission. An opportunity to earn more is a good reason for many drivers to join the service. However, the increasing competition means increased pressure to lower prices in the hope that the additional trip volume will cover the difference. Just lowering the prices is not a cure, however, and it inevitably means that the profit of both the driver and the middle-man alike are going to be far from what they are now. Nobody wins in the price war.

Startups solving the problem with community-driver approach are betting on the fact that people want to freelance to drive people around in their own car. This peer-to-peer transportation is now legal in California, and more than a million rides have been taken with these services. Some of these services are operating in a way in the gray area in regard to the business model as the passenger is expected to “donate” money in the end of the ride, not to “pay”. Also these companies with community-driver approach are testing the peak-pricing to offer drivers an opportunity to earn more. But if prices go up, the demand goes down.

Given the price pressure caused by the community-driver approach to the black car services, one of the companies in this business has expanded into this community-driver model as well. The rumors whisper that there may be some aggressive recruiting going on from the competing services. Lack of enough drivers seems to be one of the bottlenecks for the expansion.

The current “new” taxi services are not that disruptive yet

Right now these services are a replacement for a regular taxi rides, but not yet a replacement for high-volume personal transportation services such as commuting.  So it’s no surprise that the taxi associations are fighting heavily against all of these new models of the personal transportation. But the real volume (and needs of this younger generation) also calls for modern, new kind of solutions for commuting. Let’s admit it, ordering your own black car for your daily commuting is never going to be a mainstream means of transportation. It’s simply just too expensive. Nor relying on community-drivers as that may not be reliable enough, you should always be sure you get a ride to work (and back). And proper public transportation is not everywhere so this is still maybe one of the directions to go.

Let’s get back to my initial point on every vehicle becoming part of the personal transportation service. If we take a step back and take a look of these services from a bit further away, all we see is cars with one driver and one or more passenger traveling from place A to B. It’s not that disruptive yet, actually. And in order to increase the usage, the price should go down but that would mean there would be even less drivers  (and that’s a bottleneck already now) as drivers want to earn more money rather than less money (ugh, not surprising). Using community drivers is currently not a solution either as that to a certain degree decreases the degree of certainty actually getting a car at all.

So what’s the solution? Read more about that in my next post.