Heetch: 3 Years in Review and a Vision for the Future
I — Mobility After Dark
Heetch’s goal is simple: set the night free.
At night, social barriers come down, people discover each other and have new experiences, new thoughts, new worlds. We love the night, and we think that a vibrant nightlife contributes to a healthy society, as it is one of the few opportunities when people truly come together.
And yet the night is pretty poorly served from a mobility standpoint:
- Public transportation is even less convenient than during the day;
- Using your own car doesn’t work if you’re going to drink alcohol;
- Taxis and private car services don’t meet the needs of most people who want to go out.
To open up the evening, we developed a shared transportation offer that encourages nighttime trips and socializing, opening new possibilities in a safe and secure environment.
A study on the Paris region conducted by the Transportation Authority of Île-de-France, with the collaboration of the STIF was recently published. The collected data clearly show that Heetch’s model is in no way a form of competition for traditional taxi offerings, but instead has created a new, complementary form of nighttime mobility.
a) Different users
In the Paris region, there are 2–3 million trips taken each night. Taxis represent roughly 1–2% of these trips, or about 50,000 trips per night during the weekends.
The data clearly shows that taking a taxi is not a popular means of getting around. Rather, taxis address some very specific market segments:
- Affluent clients in dense urban areas
- Business travelers
- Tourists (airport destinations, etc.)
- Medical transportation
Heetch, on the other hand, aims to allow younger generations to move around at night, organizing car-sharing trips among its members, both passengers and drivers, with the former freely contributing to the expenses of the latter (fuel, car maintenance, etc.). The results are clear: while they use Heetch, 80% of our passengers under the age of 25 say they have never taken a taxi (data collected during a survey of 4,839 Heetch users in the Paris region, conducted by Etude 6T in September 2015).
Thus the target markets are radically different: ours is the mass of youths in the Paris region who do not use taxis, but who rather use either public transportation, a personal vehicle, or simply do not go out at night because they have no way to get home afterwards.
b) Supporting mobility where there is none: the suburbs
Of the 50,000 trips made on weekend nights by taxis, the vast majority occur inside Paris’s city limits. There’s a simple reason for this: a professional driver needs to make 10–15 trips per day (or per night). In order to do so, one must stay in densely populated areas where demand is at its highest.
And that’s one of the key reasons why taxis never want to take a trip out to the suburbs at night: they don’t want to face coming back to Paris without a passenger.
But an individual doesn’t have those worries. A majority of our drivers live in the suburbs, and on weekend nights they’re either at home or perhaps visiting a friend, having arrived there with their car. They can simply turn on the app and find a few people who are looking to travel back home with them, without worrying about needing to make 10 or 15 trips during the night.
That’s how the sharing economy can create mobility offers in zones that are otherwise poorly served, if they’re served at all, ultimately benefiting all of us. Areas that are not as densely populated, that don’t have easy access to public transportation, that aren’t served by professional drivers, now have a new option for getting around.
(And beyond Heetch’s own focus on the evening, we can easily see other models adapted to rural areas, where the need for new mobilities is crucial, particularly in assisting older generations.)
Our goal is to facilitate nighttime mobility through a social transport model. That means having a significant presence in the suburbs. And to see that, we just need to look at the breakdown of nocturnal movements in the Paris region:
- Only 25% of weekend trips are made entirely within the Paris city limits.
- 60% of trips never even touch Paris itself!
So while taxis are centered on Paris at night, Heetch has largely developed in the suburbs:
- 70% of our trips are linked to the suburbs.
- 33% of our trips never touch Paris, and that number continues to grow: it is in the suburbs where we have our highest levels of growth because that’s where the need is highest.
Heetch is a creator of mobility. And when we ask our users about their decisions, half say that if it weren’t for us, they wouldn’t have gone out at all.
For the others, they would have used other means of transportation: their personal car, public transportation, bicycle, walking or other professional services (2015 Etude 6T study).
Heetch also contributes to the social integration of suburban youths, giving them more options at night and reducing the cost of transportation (for those who read French, you can take a look at this research note — “Heetch: a mobility solution serving suburban youth”).
At any rate, 67% of the trips taken at night, no matter the means of transportation, never involve Paris — and that’s the market that we’re concentrating on.
c) More and more drivers: a risky bet?
On a Saturday night, there are five times more trips taken between midnight and 4:00 than are taken at that same time during weeknights.
This peak in demand, combined with the lack of public transportation at night and the risks of driving after consuming alcohol, means that non-professional services such as Heetch are necessary as a flexible response that easily adapts to shifts in supply and demand.
By its very nature, professional transportation is stable: the drivers work every day, and it’s impossible to have more available on weekend nights than are available during the rest of the week.
Adjusting the professional supply to absorb peaks in demand would have serious consequences during the rest of the week, particularly during the day. It would mean that many drivers would never be able to reach any level of profitability.
What’s more, in Paris the regional powers have no intention of extending the hours served by public transportation, and they’ve been very clear about that: “Rather than making special efforts for the thousands of Parisians who take the metro at night, we would rather improve the lives of millions of people who are very poorly served throughout the Île-de-France region.”
A proposition by Parliament member Laurent Grandguillaume, currently under consideration in the Senate, would create a new legal framework for professional drivers (taxis and VTC, voiture de transport avec chauffeur). This proposal has shown exactly how these two groups of drivers are trying to come together for the first time against reservation platforms:
- Taxi drivers and VTCs want to limit access to the professional sphere: their goal is to provide an offer that responds to an “average” level of demand. By restricting the supply, taxis are assured of limited competition and high prices;
- Platforms, on the other hand, want to open the market and provide more professional drivers in order to satisfy their clients, notably during periods of high demand, without worrying too much about how it impacts profitability for drivers during other times.
Heetch is proposing a different model, one that should accommodate both professional drivers and platforms. We believe that:
- Professional drivers should have the means to serve their traditional clientele: medical transport; businesspeople (notably thanks to having access to bus lanes, which is a significant competitive advantage for this market); exclusive access to airports, etc.
- Professional supply should be matched to average demand;
- Alongside these markets, an alternative non-professional market must be allowed to develop, under strict conditions, to provide mobility to the people: an offer that is limited to sharing the costs of driving and car ownership, with an appropriate system of taxation, one that excludes airports, etc.
The Heetch model that we’re defending allows for two worlds to exist together: that of professionals who drive in order to make a steady living, and that of amateurs who provide a service with occasional trips, during those times when the current offer is entirely insufficient.
As consumers are today looking for more and more flexibility, for us it seems natural that we imagine new mobility solutions rather than trying to rush toward more professionals (which would risk simply pushing professional drivers further and further up against an unmoving wall over the next few years, particularly considering the coming revolution that autonomous cars will bring to this market).
II- Heetch’s objectives over the next few years
a) Coordinate existing nighttime trips
More than 95% of nighttime trips are made using a personal vehicle, public transportation or by foot, as these are the most accessible means of transportation.
Heetch’s goal is to open up the evening, and to allow the youth in the Parisian region to improve their mobility options by developing an offer that is accessible to all.
To do that, our first objective is to improve the coordination of nighttime trips, lowering the cost of each by filling the empty seats of vehicles that are already moving about:
- The trips that are already organized on the platform can be optimized by grouping together passengers who do not know one another and who are all going in the same direction (using technology similar to that of Uberpool).
- Drivers who are starting a trip can pick others up along the way.
Nonetheless, in order to convince the hundreds of thousands of drivers who move about during the night to share their trips with passengers headed in the same direction, two things are needed:
- Technology adapted to such an offer;
- A clear and stable framework that allows a maximum of drivers to offer rides to people they don’t know, particularly at night.
And that’s what Heetch does: today, when they connect to the platform, 35% of drivers perform only one or two trips; at the beginning of 2015, that number was only 15%!
A significant number of Heetch’s drivers, and an increasing number of them, only conduct trips that bring them closer to their destination.
To accelerate and encourage this trend, for the past several weeks we’ve been working on a service that more efficiently connects passengers and drivers who are moving in the same direction.
But for this type of urban mobility to develop, it is necessary to construct a regulatory and financial framework that is clear, simple and stable (on this, see Part III: The Myth of Mileage Allowances and Some Regulatory Proposals).
b) European development
Our second point of concentration is developing an international offer, an ambitious goal that we’ve had since launching in late 2013.
Unfortunately the French context in which we started has slowed us down, but thriving in the shared mobility market means that it is absolutely necessary to develop in numerous countries at the same time.
The strategy of being the last little village in all of Gaul to resist the invader doesn’t work in 2016!
That’s why we must have strong positions in multiple countries to resist the challenges coming from competitors, who generally possess more financial weaponry than we do.
In order to win, France cannot shut itself into the Asterix syndrome, trying to build up a regulatory system for the sharing economy that blocks all new initiatives while other neighboring countries have already begun their digital transitions. If France does take that path, it will sadly mean that French companies cannot develop quickly enough or on a large enough scale to resist their competitors coming from other areas, notably Asia and the United States.
That’s why 2016 saw us launch our service in four new countries: Poland, Sweden, Italy and Belgium.
In 2017, we want to continue with the same rhythm, opening a new country every three months. Our objective is clear: we want to be present in every major European city by 2018, and keep coloring in more and more of our map!
III — The Myth of Mileage Allowances and Some Regulatory Proposals
If we want to develop shared mobilities and models that are fair for everyone, there must be a clear distinction between amateurs and professionals. In practice, this should go through a definition of the sharing of expenses.
a) Mileage allowances versus an annual limit
When thinking about shared mobility, the Blablacar example oftentimes comes up, where the sharing of expenses is calculated via a mileage allowance.
This model fits for the sharing of long trips, but it doesn’t work for other types of shared mobility, as you can see in the following theorem:
“The Mileage Allowance Myth in Shared Mobility”
i. If the mileage allowance is too low, it blocks the development of shared mobility in urban areas;
ii. Without an annual limit, we will see a complete deconstruction of the on-demand transportation market;
iii. It is impossible to control a system based on a mileage allowance;
iv. A mileage allowance is not ecologically-friendly and does not encourage maximizing vehicle capacity.
Evidence:
i. Risk of a mileage allowance that is too low
Let’s take the case of a mileage allowance such as that of Blablacar, around €0.10/passenger/km.
- For a trip of 300 km, that equals a benefit of €30/passenger for the driver.
- For a trip of 10 km, that equals a benefit of €1/passenger for the driver.
Now, whether the trip is for 10 km or 300 km, when we’re sharing a ride among individuals the difficulties are exactly the same:
- Letting a stranger into one’s car;
- Waiting 5–10 minutes to find one’s passenger(s);
- The detours at the beginning and end of the trip to pick up and drop off the passenger(s).
For any trip, these are “fixed costs” that a mileage allowance does not compensate.
Many drivers, however, are ready to accept these costs in order to gain €30 x 3 passengers. No one will accept them for €1 x 3 passengers, especially when there is no guarantee of having multiple passengers per trip!
As such, to develop shared mobility for shorter trips, we have to take into consideration all of the barriers for drivers. This doesn’t simply include the sharing of costs for fuel and tolls, but also the wait for passengers, the detours, etc. Not taking these into account would automatically kill off shared mobility in urban areas despite the fact that this is where there is the greatest need, for reasons ranging from traffic to pollution.
In short, a mileage allowance that is too low would mean the end of many, many shared trips…
ii. An annual limit — the only viable answer
A mileage allowance that is high enough to guarantee the development of urban shared mobility would, on the other side, upset the rest of the transportation market. At too high of a level, some drivers would immediately see a way to truly make money (these types are always out there) and start offering rides throughout the day with a professional mindset, tossing away all the rules of the sector.
To avoid this pitfall, we suggest creating a clear distinction between amateurs and professionals by instituting a limit for the sharing of expenses: beyond that limit, which we propose to be €6,000/year (corresponding to the average cost of owning a car in France), one would have to pass into the professional category. To be clear: below €6,000/year, the driver is considered an amateur, sharing the cost of owning a car with others; above €6,000/year, the driver is no longer an occasional participant in the sharing economy, but is instead a professional.
This limit will allow anyone to defray the annual cost of owning a car, all while ensuring that they stay within the sense of sharing expenses. It is a solution that will guarantee the development of new innovative offers in the shared mobility space, without undoing the professional market.
iii. An annual limit allows for a simple system of management and control
The advantage of our system is that it is easily supervised. Let’s take the example of a mileage allowance of €0.50/km. A driver decides to make a 30 km trip and asks the passenger for €15. If there is a legal question, the driver doesn’t only have to prove that they made the trip, but also the route that they took! If there is an alternative route of 25 km, they would have to prove that they really went 30 km, because otherwise they charged more than the mileage allowance and broke the law. Things get complicated very quickly…
But an annual limit means simple checks on each individual driver, and it avoids having the entire system brought into question, as we’re currently seeing with Blablacar in Spain.
iv. Maximizing free space
Finally, if there is a low mileage allowance in urban zones, for example €0.50/km, a driver will always prefer having a single passenger who will be asked to pay the legal maximum:
- The driver’s benefit is limited to €0.50/km;
- There are more obstacles when taking 2 people (more waiting time and more detours), and there is no additional benefit.
And so even if there are four available seats in the car, they prefer to take one person and have them pay €0.50/km rather than 2 passengers who are going in the same direction and who may pay €0.35/km, which would go beyond the mileage allowance.
b) France and Europe
The sharing economy is seen as a real opportunity for Europe. To encourage its development, the European Commission has recommended clearly distinguishing between professionals and amateurs by creating an annual limit, notably in the lodging and transportation sectors (see their report here).
Some countries are engaging with the question. Belgium has recently adopted a rule allowing any individual to earn up to €5,000/year in the sharing economy (excepting lodging, which is considered separately), taxed at 10% with those taxes collected directly through the platforms.
In France, at the end of 2015 the Senate similarly voted on a fiscal limit for the sharing economy that would have provided for €5,000 in annual income without any taxes; but this proposal was not approved by the National Assembly.
Since, notwithstanding numerous suggestions (the Terrasse report, the IGAS report), there has unfortunately been no movement allowing for the creation of a clear framework encompassing the whole of the sharing economy.
c) Heetch’s Regulatory Proposals
1. Ensure shared mobility by defining the sharing of expenses among individuals:
- Guarantee shared mobility between individuals and ensure that there is fair competition by distinguishing between professional driving and the sharing of expenses: so long as they are within the limit of the costs of owning a car, the platform’s users will be considered as amateurs, not professionals.
- Help those who earn amounts above the costs of owning a car to become legal professional drivers (adhering to the legal requirements, taxation based on real costs, social protections as driving becomes one’s “principal activity”, licenses, training).
2. Defining a single legal, social and fiscal limit, bringing together all platforms:
Given the impossibility of determining the exact costs to be shared at any given moment (which would depend on the type of car, the number of miles driven each year, the price of fuel at a given moment X, etc.), we believe that there should be a single legal, social and fiscal limit that brings together all platforms and that will be simple and understandable for users.
That limit will be fixed at €6,000/year, which is the cost of owning and operating a car during the year according to the ADEME (The French Environment and Energy Management Agency).
- Moreover, we propose a tax exemption for those who remain below the limit of €6,000/year, as this remains in the regime of sharing the costs of owning and operating a vehicle.
- Above €6,000/year, the driver is required to become a professional, and will be subject to associated taxes.
3. Agreement between platforms and the tax authorities regarding the sharing of data
Operating under these conditions could be reserved for those platforms that have signed an agreement with the tax authorities, the terms of which would be:
- Obligation of the platforms to fix the annual revenues of a user at €6,000.
- Each platform must transmit to its users, on an annual basis, the revenues earned throughout the year (conforming to Article 87 of the 2016 tax code).
- Each platform will provide the tax authorities with access to this data (conforming to Article 87 of the 2016 tax code).
- In the future, an automatic system for sharing this data between platforms and tax authorities could be put in place, particularly as it relates to tax withholding and under the supervision of the CNIL (National Commission on Informatics and Liberty).
4. Financing a digital transition fund
Today, the traditional players must reinvent themselves. In order to support the digital transition in disrupted sectors, we propose that all platforms of shared mobility be subject to a tax of 10% of the gross revenues exchanged on the platforms.
This tax will support the digital transition in traditional sectors while participating in the French social structure.
Rather than seeing the situation as a competition between two models, we believe that it is possible to preserve the social frameworks that we, as citizens, believe in and wish to see continue.
