The Shift Towards Multimodal Transportation & The Future of Mobility

And What It All Means For Brands

Richard Yao
IPG Media Lab


On Monday, Uber announced it is investing in Lime, an electric bike-and-scooter-sharing startup formerly known as LimeBike, as part of a $335 million financing round led by Alphabet Inc.’s venture arm GV. In addition, Uber is reportedly working on a strategic partnership with Lime to let users rent Lime scooters directly via Uber’s app. According to Bloomberg, Uber also plans to plaster its logo on Lime’s e-scooters, effectively subsuming Lime’s scooter-sharing operation into its own branding.

Of course, Uber is not the only one investing incar alternatives. Last week, Lyft acquired leading bike-sharing company Motivate, whose in-market operations include CitiBike in New York City and Ford GoBike in San Francisco. According to Lyft, Motivate was responsible for 80% of bike-share trips in the U.S. last year, and this acquisition is no doubt a direct response to the Uber-JUMP acquisition. Taken together, the two U.S. ride-sharing leaders are racing to build out their transportation services beyond cars and strategically expanding into what has come to be called “multimodal transportation.”

This shift in on-demand transportation will have lasting implications for the auto industry as well as consumer behavior more broadly. As the New York Times explained in a recent special issue, cars have been such a quintessential part of the U.S. consumer culture that changing mobility will certainly mean not only changing the infrastructure and urban landscape, but upending the rituals and rhythms of everyday life as well. Therefore, we will start with a close look at the ongoing shift towards multimodal transportation and the “Transportation as a Service” (TaaS) model, before turning our attention to the resulting takeaways for auto brands and beyond.

All-In-One Multimodal Transportation

Multimodal transportation simply refers to the way people travel by multiple means of transportation, which includes biking, driving, taking a bus or subway, and now riding an electric scooter. It is particularly relevant for people using public transportation, as rarely their routes are perfectly covered by bus or subway. Therefore, they could turn to alternative short-range transportation to complete their journey, an issue that has rarely been on the mind of the hundreds of millions of U.S. car owners. However, as millennials delay car purchases and wide adoption of on-demand ride-sharing services makes car ownership seem less appealing and essential to an urban lifestyle, it is no surprise that U.S. car ownership is showing early signs of decline and urban dwellers are driving less across generations. As a result, more and more people will have to confront their need for multimodal transportation services.

And this is where the ongoing frenzy over e-scooter and other alternative modes of transport comes in. Bikes and electric scooters are both valuable components of this vision of multimodal future, and both Uber and Lyft are increasingly investing in them in order to fully control the transportation experience with the goal to become the one-stop service people turn to for all their transportation needs¹.

After a few months of a VC investment frenzy that led to ballooning valuations of e-scooter startups, it looks like the chaos of “scooter mania” is finally ready to settle down a bit as the market reorients towards consolidation. Although Uber is only seeking partnership with Lime for now, the company’s history with e-bike company JUMP, which Uber also struck a similar partnership with before acquiring it for $200 million in April, suggests that perhaps an acquisition might not be far off.

As for Lyft, while it seems unlikely that it would acquire Lime’s arch-rival Bird considering its bad blood with the latter’s founder, there is a possibility that it could acquire Spin, a distant third in the e-scooter market, or simply build out its own electric scooter service. Whichever way they choose to pursue, it is almost a certainty that Lyft will follow Uber into the sharing e-scooter economy before long, for it simply cannot afford to wait too long and leave this promising new market to Uber and Bird. “Soon you will be able to get real-time transit information, plan a multi-modal trip, and use Lyft Bikes and Scooters to connect to a local transit stop or shared ride pickup location,” Lyft co-founder John Zimmer recently shared in a Medium blog post.

It is worth noting that this multimodal trend did not originate in the U.S., but rather first gained traction across Asian and European markets where car ownership is a lot lower, driving higher demand for multimodal transportation services. In fact, bike-sharing has already gone through a full boom-and-bust developmental cycle in China, which should serve as a cautionary tale to the participants of the scooter mania². Careless deployment coupled with poor vehicle management have resulted in terribly high piles of bikes dumped on the sidewalk near urban transit hubs in China, causing traffic congestion and local backlash. Similar scenarios, albeit to a lesser degree, are also happening in the U.S., which points to the challenges of adapting a new means of transport to the reality of city life at scale.

Shared bikes piling up on the sidewalk in Shanghai. Source: The Guardian

Despite those growing pains, accommodating short-range transportation into the ride-sharing economy is no doubt happening, and for a good reason. Most people that have tried the scooter-sharing services do generally tend to end up liking them. While it is possible that e-scooters will die out the way Segways did a few years back, it is more likely that, with the ride-sharing giant now on board, they will have some staying power as Uber and Lyft transform into full-stack local transportation services.

Even if e-scooters don’t ultimately make the cut due to regulatory or other factors, the larger trend of multimodal transportation prevails. The sharing of bikes, scooters, and other forms of short-range alternatives aim to address the growing “last-mile” transportation needs as car ownership starts to decline, and serves as a crucial piece of the larger puzzle that is the future of mobility services.

From Transportation To Mobility Service

With the rise of ride-sharing services and exciting advances in autonomous vehicle development, industry analysts have long envisioned a future where on-demand ride services powered by self-driving cars transform the way we travel from personally-owned modes of transportation towards connected mobility solutions that are consumed as a service. The concept of Transportation as a Service (TaaS) mirrors the ongoing shift in music and video consumption where we no longer purchase physical or even digital copies of content, but rather pay for access to streaming services for all our content needs. The internet and the resulting digitization it brings to our lives provides an interesting way of turning product-oriented business models into access-based services, and transportation is no exception in this regard.

We already saw some early models of such TaaS mobility concepts at the CES at the beginning of this year. Since then, the global expansion of on-demand ridesharing services and developments in autonomous driving technologies have continued at a brisk pace. Uber is set to pilot a taxi-hailing service in Japan after regaining its license to operate in London again. It has also created a low-data-usage Uber Lite app to better serve its growing users in emerging markets. Lyft is also considering entering Japan’s challenging ride-hailing market and it is reportedly in talks to buy Spain’s ride-hailing service Cabify for $3 billion. Even China’s Didi has launched its ride-hailing service in Mexico to challenge Uber and Lyft in a market near their home turf. Barring the exception of Singaporean regulators blocking Uber’s acquisition of Grab on antitrust grounds, the market seems to be entering an M&A-heavy consolidation phrase as the leading on-demand ride-sharing services move into global markets.

In contrast, the autonomous vehicle market is blooming with much more variety as more players race to bring self-driving cars to market. Even Uber’s high-profile accident in March ultimately did little to deter the market enthusiasm and momentum. Lyft added 30 self-driving cars for public rides in Las Vegas in May, whereas Uber is set to resume testing in Pittsburgh as early as August. Waymo is collaborating with researchers from Google Brain in using AI, deep learning, and neural nets for its driverless vehicles. In China, Baidu got the regulatory green light to test self-driving cars on public roads in Beijing while Alibaba confirmed it has started its own self-driving car tests, joining Baidu and Tencent in China’s autonomous car race, which some analysts say could become a reality there sooner than the U.S.

This week, an FBI investigation into an ex-Apple employee revealed that Apple’s team working on its autonomous vehicle project, codenamed Project Titan, is much bigger than we previously thought, which has led some to speculate that Apple may be coming out with a self-driving product sooner than expected. It remains unclear whether that would be an Apple car, or a self-driving software system Apple will license to partnered automakers. Or It could also be something else that is related to autonomous driving such as mapping or buses.

Furthermore, the TaaS model is not limited to moving people, it also applies to movement of goods. Already, we are seeing Kroger partnering with autonomous driving firm Nuro to test autonomous grocery deliveries while various startups like Boxbot and Starship Technologies race each other to build autonomous delivery robots. But autonomous delivery is just the first step. As we noted in our CES trend recap on mobility, the future TaaS networks could double as autonomous retail platforms, each consists of a fleet of multi-use vehicles that essentially functions like a self-driving store on wheels in the urban environment. Needless to say, this will bring further implications for businesses of all types, which we will return to in the last section.

In conclusion, a confluence of growing on-demand ride services, marked by an ongoing shift towards multimodal transportation, and the steady advances in autonomous driving technologies is pushing us ever closer to the TaaS model where transportation becomes more like a utility service accessible to all. As more users rely on public transit components or autonomous vehicles in a multimodal TaaS network, it would bring benefits such as lower transportation costs, better utilization of transit providers, and reduced city congestion, which all contribute to a cheaper and better mobility service that would in turn benefit local economies. And whoever ends up owning this network will have a powerful platform to build more services on top of it and even explore potential media and ecommerce opportunities, given the attention it would capture and the payment methods it would have on file.

What This Means For Auto Brands

As a result of these ongoing trends, the paramount challenge for auto brands to contend with is the projected decline of car ownership. For decades, the auto industry has been predicated on a product-oriented business model that relies on local dealerships as regional distribution channels. It is a somewhat outdated model that Tesla — and soon Amazon — is already challenging with a direct-to-consumer approach. As transportation move towards a TaaS model, automakers may benefit from restructuring their business model to adopt a more B2B-oriented approach predicated on partnerships and sponsorships with the on-demand ride services, as well as trip planners such as Google Maps and Waze, that together will soon control the interface of TaaS.

For example, for this year’s SXSW festival, GM brought its car-sharing subscription service Maven to Austin, but not for the festival-goers. Instead, it is aimed at signing up freelance drivers working for ride-share apps like Uber and Lyft and other on-demand delivery apps so as to provide them with an insured rental car. Until autonomous vehicles become a widely adopted mobility solution, marketing to the drivers of on-demand mobility services will likely become a high priority for auto brands. Granted, this will no doubt presents some conflicts with its existing business model. A tricky balancing act will be required of auto brands to navigate the two business models simultaneously.

Ultimately, though, on an aggregating service like on-demand ridesharing that inherently commoditizes supply, consumers rarely care about which brand of vehicles they get algorithmically matched with, as long as they show up and do their job. In response, auto brands will need to double down on differentiation, both in terms of the vehicles and the in-car experience they provide, in order to resist becoming a commoditized vehicle supplier and thus getting squeezed out of the mobility value chain.

This is especially true for high-end, luxury car brands that still have a good chance at holding on to their established brand and leveraging that to encourage customers to actively ask for your brand’s vehicles by name when using an on-demand service, similar to the way that they would specify preferred CPG brands in voice shopping. Extending strong customer service to address all mobility needs and fortify existing customer relationships is also a good strategy in this regard. [Update July 17: BMW has launched Ride, a new ride-hailing offering available in Seattle, as part of its car-sharing service ReachNow]

Naturally, auto brands are also stepping on the gas pedal on their autonomous vehicle initiatives, usually in collaboration with the leading tech companies for the added advantage of tapping into their AI prowess. For instance, Volkswagen recently signed a deal with Apple to provide the iPhone companies with vehicles for its self-driving shuttle project. Similarly, German carmaker Daimler AG is partnering with chipmaker Nvidia on a robot taxi project that will begin testing within a year. SoftBank recently announced it will invest $2.25 billion in GM’s self-driving car unit Cruise, whose hands-free Super Cruise mode is coming to all Cadillac models and other GM brands by 2020.

Auto brands bring valuable experience in vehicle design and manufacture that the technology firms are desperately in need of in order to get autonomous vehicles right, and smart auto brands will figure out how to leverage that advantage to not only have a say in the development of autonomous vehicles, but also play an active role in shaping the future of transportation.

Takeaways For Other Brands

As we previously mentioned, the future TaaS network owners will likely possess enormous media and ecommerce opportunities thanks to the network’s aggregating nature and payment integration. This means that there will be plenty of ways for brands and local businesses to advertise and directly drive sales and visits. A true multimodal TaaS network will also play a big role in transit advertising, where digital displays are already replacing print ads and opening the doors for personalized transit ads that one day could be synced up with the TaaS rider profiles for maximum relevance³.

The shift towards multimodal transportation within a centralized TaaS network is also presenting some interesting potential for brands to subsidize or even sponsor the trips with discounts or branded in-trip experiences. We already have in-car navigation systems like GM’s OnStar that works with brands like Dunkin Donuts to surface offers to drivers whenever it is relevant to the trip. A similar but scaled up version of such a system could develop on a TaaS network that brings brands closer to consumers on the go.

Even more exciting are the new retail and distribution models that TaaS networks powered by autonomous vehicles could unlock for businesses. The TaaS network will bring a paradigm shift to the distribution model of many other industries such as retail, healthcare, and restaurants. When a fleet of self-driving cars are ready to deliver your products and, with staff onboard, services to any customer who requests them, distribution will become a highly modularized and customizable experience that brands will need to relearn how to best manage.

Grab, the leading ride-sharing service in Southeast Asia, recently launched a “Grab Platform” initiative that hints at the potential of such new models. The platform allows third-party companies to integrate their services in Grab’s app and tap into Grab’s roaming fleet as well as its GrabPay payment service for completing transactions and delivery. One launch partner is grocery delivery company HappyFresh, which has developed a version of its service and integrated it into the Grab app to let users order groceries on-demand. Once autonomous vehicles become a viable option, Grab would simply need to replace its fleet with self-driving cars for even better efficiency, and the third-party services it integrates will continue to add value to its mobility network.

Last but not the least, as transportation transition into a service model, the way we pay for it will also change. As with most services, TaaS would likely result in two models: pay-as-you-go or subscriptions. In Helsinki, residents are getting around the city by bus, train, bike, taxi, or car, via a monthly subscription to all-inclusive multimodal transportation app Whim.

Both Uber and Lyft have been testing subscriptions for their services, but they can be a difficult fit at a larger scale for a two-sided network like ride-sharing. For one thing, ride-sharing networks today use surge-pricing to balance supply and demand, which runs directly counter to the economics of a subscription plan. Plus, the thin profit margin at which most ride-sharing services currently operate can’t shoulder the discounts that subscriptions generate for heavy users. Lyft tries to address those challenges by adding some trip limitations and usage caps to its subscription plans, which only dilutes the appeal of the subscription itself. Therefore, the pay-as-you-go model will likely persist in ride-sharing for the time being, which leaves the door open for the brand-subsidized rides that we discussed earlier.

However, both challenges would become a non-issue once autonomous vehicles become a reality and transform the network into a demand-driven network that doesn’t need to worry too much about managing supply. And TaaS becomes a subscription-based service, new consumer behaviors will likely emerge, especially for the third-party brand experiences the networks integrate. For example, when autonomous grocery delivery is covered in a monthly Uber subscription, it stands to reason that the way people shop for groceries would likely shift from a premeditated, getting-everything-in-one-go model to a more context-driven and flexible approach to grocery shopping. SImilar to the way Amazon Prime encourages subscribers to shop more frequently with fast, free deliveries, a subscription-based TaaS network will alter the way customers purchase products and services, presenting new opportunities and challenges for brands to address.

End notes:

  1. Some challenges do exist in integrating the public transportation systems into the fold. But if the bus services that Lyft and Uber have been testing serve as any indication, it looks like group transportation could be incorporated into ride-sharing soon. After all, the existing carpooling mode on most ride-sharing services is already like a micro-level public transit service.
  2. Interestingly, the e-scooters deployed by both Bird and Spin are basically rebranded Mi scooters made by China’s Xiaomi while Lime has two Chinese founders, further pointing to the active involvement of the Chinese tech players in the ongoing scooter mania.
  3. Privacy debates will certainly erupt over the ethics of serving personalized ads in public spaces where others may also see them.