GM's Maven exits show tough road for mobility

[jpd80]

 

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GM's Maven exits show tough road for mobility

Automakers' faith in unproven business models tested

Michael Wayland          https://www.autonews.com/mobility-report/gms-maven-exits-show-tough-road-mobility       

 

DETROIT — General Motors and other automakers envision bringing in significant profits from alternative ownership models such as car-sharing and subscription programs. Someday.

But for now, such mobility services are generally big money losers. And executives are increasingly discovering that they don't have the stomachs to let those businesses hemorrhage so much cash while they wait for technology and demand to reach the point where the services help the bottom line instead of hurt it.

GM, after expanding its Maven mobility brand to 17 metropolitan markets in the U.S. and Canada since January 2016, last week announced a "shift in strategy" that included exiting eight U.S. cities to concentrate on areas with "the strongest current demand and growth potential," the company said.

The pullback is the latest example of the balancing act automakers face between spending on unproven business models based on emerging technologies and reinvesting in their profitable primary business, manufacturing and selling vehicles.

"Alternative ownership, ride-hailing and car-sharing is still the Wild West," IHS Markit principal automotive analyst Stephanie Brinley said. "The opportunity for mobility services to generate revenue is there, and it's true, but getting from here to there is messy. And the scale, we don't fully know."

While Maven and other mobility operations have been hailed by Wall Street for their profit potential, automakers that have hedged their bets through broad strategies are having to better prioritize where profits should be reinvested as they brace for slowing vehicle sales and a potential economic downturn.

In GM's case, autonomous and electrified vehicle technologies — also highly unprofitable for now — appear to be a higher priority than alternative ownership models, in part because they can support mobility businesses later.

 

Ironic how the industry seems to go through this seemingly cyclic process every 20 years or so, trying to diversify away from it core automotive business and then realizing that the grain on precious profits is greater than the potential of a new income stream. There will be winners and losers as companies jockey for market capture but in the end I think the tech companies wll have the final say.

Widespread AV use is still over a decade away until everywhere is electronically "mapped" and 5G for automotive is fully rolled out. Until then, fleet users will be the man focus but given our new found addiction to online shopping and fast home delivery, there's lots of opportunity forfleets and couriers and service vehicles to use connectivity and automation. slow speed buses and trams are the next rollout of automation after automated menro (Sydney Australia)

[rperez817]

It's a tough situation for automakers. On one hand, new business models like mobility services are risky for them to pursue. Low or no profit in some cases, as GM found with Maven and Ford found with Chariot. But on the other hand, if they don't pursue these types of business models, automakers run the much bigger risk of becoming irrelevant in the future.

Good point jpd80 about the "cyclic process very 20 years or so" of automakers trying to diversify. Now however, the automotive industry is undergoing the most dramatic transformation ever.

Edited May 28, 2019 by rperez817