BMW is said to be exploring offering a ride-sharing service, something that would pit it against the mighty Uber.
The automaker's plan doesn’t yet seem fully hatched -- but it looks like a sensible defensive maneuver to counter the challenge from the ride-sharing app.
BMW board member Peter Schwarzenbauer told Germany's Spiegel Online that he could envisage expanding its DriveNow car-sharing operation (a joint venture with car rental company Sixt with about 580,000 registered users) to include a ride-sharing element.
How might that work? Schwarzenbauer didn't say, but Spiegel Online speculated it might, for example, allow students to use a DriveNow vehicle when it wasn't required (perhaps on a Friday night) and then offer lifts to paying customers.
Such a service should be cheap to get off the ground and would help get maximum value out of BMW's existing car sharing fleet, which operates in cities in Germany, Austria, the U.K., Denmark and Sweden. Higher utilization is generally a good thing for car manufacturers because vehicles need to be replaced more frequently.
Uber, which logged its billionth ride in December, currently poses more of a threat to taxi operators and rental car providers than the automakers themselves. In fact, BMW partnered with Uber to promote its new 7-series saloon to Uber's customers.
Ride-sharing will for the time being remain a supplement to personal car ownership, not a replacement thereof, according to analysts at Evercore ISI.
However, autonomous vehicle technology is advancing rapidly and one day we'll likely be able to hail a driverless car to pick us up. At that point car ownership may start to seem a ridiculous proposition and consumers could become less fussy about what brand of car actually collects them.
It's not hard to imagine a scenario in which Uber and BMW might come to vie over the same turf: both will be competing to provide mobility to customers.
Uber was last valued at $62.5 billion whereas BMW's equity is valued at 51.9 billion euros ($58 billion), suggesting investors currently think Silicon Valley stands to gain most from that battle.
Yet, while Uber has impressive head start in ride-hailing services it isn't infallible. Its business model is certainly innovative, but its ride hailing technology isn't especially complicated (compared to, say, designing a combustion engine). Nor would it be difficult to replicate.
So there isn't any fundamental reason why a competing ride-hailing service shouldn’t emerge.
That helps explains why General Motors recently paid $500 million for a stake in Uber-rival Lyft and Daimler (owner of Mercedes-Benz) acquired taxi-hailing app MyTaxi and a stake in limousine service Blacklane.
Germany is also a good place to mount the counter-attack as car-sharing is already well-established there, suggesting people are already less attached to the idea of owning their own vehicle. Uber has also been forced to dramatically scale back its expansion in the country due to various court bans and opposition from tax operators.
On its home turf, BMW should be rather better at navigating the country's myriad rules and regulations. By taking a more careful, considered approach, BMW could yet cause Uber a headache.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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