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70% of rideshare market still untapped

Uber and other rideshare providers have only tapped in to 29% of their potential market in the U.S., say Autovista, referring to a recent McKinsey study. The crucial point: ridesharing is still more expensive than private car ownership.

According to the McKinsey research, the 45% annual driver turnover rate is limiting the growth of ridesharing. Although it currently is growing at an annual rate of 250%, the all U.S. rideshare providers still only account for just 1% of vehicle miles in the U.S.
 
Ways forward
The consultants suggest two ways forward: flexible vehicle design (e.g. the provision of booster seats etc.), to attract the family market; and ridesharing services that seamlessly pool services in the same vehicle, thus both increasing convenience and lowering costs, which would attract both the commuter and business markets.
 
And indeed, research shows that 83% of rideshare users rate convenience as the top reason for choosing the formula – which in McKinsey’s definition includes not just 'classic' ridesharing, but also e-hailing and dynamic-route minibus services. 
 
However, in a market already dominated by players like Uber and Lyft, it is increasingly difficult for newer startups to generate brand recognition and a loyal user base. Unless... those newcomers manage to offer something completely different, to appeal to the untapped 70% of the market.
 
Wide-open markets
The 'tapped' part of the market are business trips, and trips within cities and suburbs. This leaves the entire rural and non-urban market wide open for new providers. And, as current rideshare solutions do not take on board – literally nor figuratively – large amounts of retail shopping, the shopping market per se is another key unaddressed market.  
 
An interesting finding from a behavioural study of rideshare commuters shows that they are more introverted in the morning, and more extroverted in the evening – a divergence to which various transportation modes could cater, for example by offering a more private experience on the way to work. 
 
Lunar, McKinsey’s in-house vehicle designers, address this with the WEGO, a minibus with modular seating, allowing passengers to choose a more private or a more communal experience.  
 
Safety USP
Research also shows that commuters increasingly value ridesharing per se, as individual commutes by car have become more and more time-consuming and stressful. Users also consider ridesharing safer than taxis – however, women do not feel safer in Uber cars. So, there is still a way to go before safety becomes a USP for ridesharing. 
 
With the cost structure of a non-dedicated rideshare vehicle up to 40% lower than for a dedicated vehicle (e.g. a London black cab), rideshare vehicles can lend themselves to other uses, for example goods delivery during off-peak hours.
 
Growth areas
In the coming years, ridesharing will have three main areas of growth, says McKinsey.
 
→ Firstly, purpose-built vehicles that provide the required levels of safety and flexibility. More flexible approaches to ridesharing are more likely to do well especially in Europe and Asia, which are already much more multimodal than the U.S., with its fixation on the car. 
 
→ Secondly, multi-person transportation solutions, as already offered by MOIA and Uber Pool. If these solutions target the as-yet untapped commuter neighbourhoods and employer hubs in the U.S., ridesharing could soon reach 40% of the general population. 
 
→ And thirdly, autonomous vehicles, dramatically reducing cost by eliminating the driver. Driverless vehicles will also have radically different designs: more open, with more connected features and entertainment options.  
 
Image: Pkg203, CC BY-SA 3.0
 
20/06/2017  |  Frank Jacobs

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