Will Ridehailing Eat Up the Carsharing Pie? Here’s Why We Think Not

ridehailing vs carsharing
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As we undergo new market assessment for prospective new car share operations, we are realizing that one common concern of launching this business model is whether the ridehailing giants will take over and make carshare obsolete in the near future. Giants like Uber, Lyft, Careem or Didi are certainly providing a needed solution in the market, however, our research (and the reflection of research from our peers) shows that ridehailing won’t overtake carsharing. In this article, we explain why that is.

Facts and Demographics of Ridehailing Users

When considering whether ridehailing will overtake the carsharing space in the near future, especially with the rise of AV’s becoming a reality in the next 5-10 years, we look at the current facts and demographics of ridehailing users.

When looking at Demographics and Use Cases for Uber and Lyft in 2016 the Pew Research Center found that, despite all the media hype around these ridehailing giants, only 15% of all U.S. adults have used Uber or Lyft. They also found that the typical ridesharing consumer is young, highly educated and generally earns more than the US median income of $59,039.

Vugo Rideshare Advertising had similar findings in their own survey of Uber/Lyft drivers to understand who the typical ridesharer is:

  1. Young (25-34): While riders’ ages span from 15 to 55 and up, approximately 57% of all rideshare passengers fall in the 25-34 category. And riders aged 45 and greater only make up 7% of the total rideshare passengers. This results in ridesharing skewing heavily toward a younger audience.
  2. Male: Male riders make up 60% of the rideshare passenger population.
  3. Educated: More than 80% of all ridesharing passengers hold a bachelor’s degree or higher.
  4. Affluent: At least 56% of all rideshare passengers reported a household income of $71,000 or higher, with nearly 40% of all passengers making at least $100,000.

Looking at the above statistics, we know that ridehailing giants like Uber and Lyft are only tapping into a small percentage of the population, and are only providing solutions to a fraction of the mobility challenges within a given location.

Mobility Challenges Ridehailing Doesn’t Solve: an opportunity for Station-Based carsharing

While ridesharing is an ideal solution for those that fit into the above demographics, it’s not the ideal option of choice for many demographics, including:

  • Women: Safety concerns for women using ridehailing services, ie. travelling with a stranger, makes it a less-likely option
  • Families: Families are unlikely to use ridehailing services because of the lack of affordability and the need for additional space and loading time flexibility
  • Older demographic: Also requiring a more affordable option for mobility, the older demographics are less likely to use ridehailing in addition due to a lack of trust and familiarity

The solution for these demographics? While members of free-floating carsharing services have a similar demographic profile, station-based carsharing seems to have expanded its reach as a McKinsey Study of Zipcar in 2016 has shown. Baby boomers in particular become an active consumer segment when they move back into town.

“Between 2015 and 2030, the 60-plus age group in the United States, for instance, is projected to contribute 40% or more of consumption growth in categories such as personal care, housing, transportation, entertainment, and food and alcoholic beverages,” reported a 2016 study by the McKinsey Global Institute titled “Urban World: The Global Consumers to Watch.”

Travel Patterns of Ridesharing vs. Carsharing

Another big difference between the uses of ridesharing and carsharing are the travel patterns typically seen in each. When reviewing the data, it is clear that ridesharing is implemented more commonly for shorter, inner-city trips as well as airport pick-ups/drop-offs. In fact, the average trip length for Uber and Lyft in the US is about 6.4 miles (reported by SherpaShare in 2016).

These travel patterns are also seen in free-floating carsharing members, but are different in station-based carsharing members. Data collected by our organization reflect that most station-based carshare journeys are between 15 miles and 2 hours.

Long trips are not ideal for rideshare or ridehailing, in fact, Uber and Lyft both have policies in place that limit extremely long trips. As of Feb 2017, Uber’s limit is at 4 hours and Lyft ‘s is 100 miles and $500. Once the ride reaches the limit, the trip has to be ended and the rider needs to book a new one. If the rider is outside the coverage area, he/she could be stuck in the middle of nowhere with no ability to request a new ride.

The latest working paper by UC Davis looked at trip use cases for rideshare users and reasons why respondents choose to use Uber/Lyft. 38% of the respondents use ridesharing services when going to parties and bars, use cases that traditional carsharing services don’t want to support because of their 0 alcohol tolerance policies.

The Reasons for Using Ridesharing Services

For those that fall within the demographic of the ridesharing population, it’s also important to understand the top reasons they choose ridehailing over carsharing. When asked about the reasons for using ridesharing services, the top three reasons where:

  1. Avoiding drinking and driving
  2. Difficulties finding parking
  3. Parking is too expensive

Parking is one of the cornerstone problems for carsharing operations to solve, but when it is done well, the only use case not solved from the list above is the first: when members use ridehailing to avoid drinking and driving.

The Market Potential for Carsharing

So the big question is: is there anything left with the aggressive expansion of ridesharing? There seems to be a general consensus that rideshare companies predominantly decrease the number of taxi trips taken. Certify compared transportation expenses of business travellers between 2014 and 2016 and while ridesharing has impacted the car rental industry by 15%, it has decimated the taxi industry.

Portland’s Bureau of Transportation has however found that the growth of the ridehailing services is only partly at the expense of taxi companies, and that it can actually also increase overall consumer demand. This theory is proven by a look at Portland: four months after the arrival of Uber and Lyft in Portland, the weekly total of taxi and ridehailing rides increased by 40%.

So if that is the case, what happens to the carsharing companies? On the one hand, the UC Davis Working paper found that 14% of carsharing members give up their membership once they start ridesharing. But on the other hand, high and increasing air pollution and congestion are triggering tight policies on traffic. Another UCDavis report showed that VMT and deadheading (ridehailing vehicles roaming around empty to find a “new” passenger) have increased in the City of New York. And cities are reacting to these ridesharing challenges by imposing stricter restrictions on them. Carsharing has been proven to remove personally owned vehicles off the road while ridesharing hasn’t, and it is seen as a solution to provide personal mobility in such cities.

What are your thoughts on the ridesharing vs. carsharing pie? Will ridesharing overtake carsharing, or is there enough room for both? Contact us here for more resources and studies relating to ridesharing and carsharing.

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