What Does Ford Want With A Shuttle Bus Services And Bike Sharing?

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In March, Ford Motors (NYSE:F) announced the launch of a subsidiary called Ford Smart Mobility LLC to “design, build, grow and invest in emerging mobility services”. Until then, Ford’s presence in this segment was only its Ford Pass mobile phone app that allows Ford customers to find parking spots in some cities, hail Ford cars as cabs from the airport via the airport ride-sharing car service Flight Car, book appointments with Ford dealerships and keep track of their Ford Credit loan deals. Now, the subsidiary has gone ahead and announced the acquisition of a San Francisco based crowd sourced shuttle bus service Chariot and a collaboration with Motivate, a leading bike sharing service provider, to offer a bike sharing service under the Ford brand that will be offered as part of its mobility services.

Why This Matters

As we’ve mentioned in previous articles, the emergence of better public transportation infrastructure and ride sharing service providers like Uber and Lyft, has led to a decline in the number of new vehicle licenses issued in the United States and a decrease in the average number of miles driven per vehicle. These are two trends that threaten traditional auto makers engaged in the design, manufacture and distribution of vehicles. The San Francisco-based Chariot is one such service. The company owns a fleet of about 100 buses that ply their trade on routes that are crowd sourced from passengers via a mobile app. The service fills a niche between public transport like subways and buses, and ride sharing or taxi hailing services like Uber and Lyft. Significantly, given the ability of a bus to carry many more people than a car, its cost per unit is much lower than what an Uber or Lyft ride costs.

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Ford’s collaboration with Motivate to launch a bike sharing service pilot under the Blue Oval brand is an intriguing proposition that might baffle one at first pass. However, this collaboration is of a piece with the Chariot investment. Ford plans to expand the Chariot shuttle service to at least five additional markets over the next year and a half. The bike sharing program will only help Ford gather more data on popular or high demand routes and help it make its services better. One of the most important components of the ride sharing service is solving the routing problem, a problem that involves the efficient deployment of resources along routes to ensure a smooth and seamless experience for users of the service. Leaders in this market like Uber have gained significant head starts through offering services like UberPool in finding solutions to this problem. If Ford is to have competitive services with Chariot or other services going forward the experience it can gain through will be invaluable.

Challenges

Given the dominance of Uber and Lyft in the ride sharing market and the presence of a strong public transport infrastructure in the United States of America, it might be difficult for Ford to convince consumers that are not already Ford customers to download and use the Ford Pass mobile app. Therefore, bringing such users into the Ford brand through Chariot and Motivate will help the company. However, this is certainly not going to be easy given the significant network effects involved in ride sharing services. Network effects are demand-side economies of scale that make it easier for companies to acquire new users at smaller marginal costs. In the ride sharing market, users flock to apps that have a high volume of rides available on them and drivers put their rides on apps that have a high number of users using them, thereby ensuring that a large majority of them end up on the same platform. Habits are sticky and users rarely venture to different platforms once they form their preferences. Therefore, convincing people who use such services to try out bike sharing or crowd sourced shuttle bus use might prove to be a challenge.

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