It's becoming clear that new technologies like autonomous vehicle systems and new technology-enabled business models like ridesharing will combine in the not-too-distant future to transform the way we get around, at least in some situations.
How will this all play out, and how can investors profit? It's still hard to say for sure, but we got some glimpses of that near-future world in 2017 that could help guide investors toward the best opportunities to profit from this transformation. We asked three of our Foolish investors to talk about the stories that they thought shed the most light on how "personal mobility" might evolve over the next few years.
Self-driving taxis are no longer a futuristic dream
John Rosevear: For years, futurists have talked up a new vision of urban mobility, in which human-driven cars and taxis are replaced by networked self-driving vehicles. The hope: safer transportation, less traffic, and lower costs.
Such a future still seems a long way off. But General Motors (GM -0.05%) took a huge step toward that vision in 2017 by announcing that it plans to make that vision a reality, and soon.
General Motors unveiled this "mass-producible" self-driving version of the Chevrolet Bolt EV in 2017. Image source: General Motors.
GM and its San Francisco subsidiary, Cruise Automation, have been working for over a year on a self-driving version of GM groundbreaking Chevrolet Bolt EV. In a presentation in November, GM executives revealed that it will begin mass-producing self-driving Bolts for urban ridesharing duty as soon as its self-driving software is deemed safer than a human drive -- a point that it currently expects to reach in 2019.
Many automakers, and some big companies outside of the auto industry, have talked up the idea of producing self-driving cars in volume. A few, most notably Alphabet (GOOG 0.37%) (GOOGL 0.35%) subsidiary Waymo, have self-driving systems that are at least as close to production-ready as GM's. But as far as anyone knows, GM is the only company that already has the car and the factory to build it -- and a self-driving system in an advanced stage of development.
It turns out that the Bolt was designed from the start with a self-driving ridesharing future in mind, putting GM in position to crank them out by the thousands as soon as its system is ready. Now the race to deploy a fleet of self-driving taxis in urban areas is on in earnest -- and in a surprising twist, it's an old Detroit dinosaur that appears to be in the lead.
Smart mobility, smart moves
Daniel Miller: I'm sure Lyft investors took some pleasure in the brutal year its chief rival Uber had; Lyft gained ground as Uber dealt with boycotts, discrimination controversy and its founder ousted as CEO, among other developments. But while Uber was occupied with damage control, Lyft was busy working on smart mobility projects that could define its future.
Though Uber has its own in-house self-driving research and development program, Lyft has opted to work in partnerships with multiple companies. It's a strategy that enables Lyft to offer its vehicles for testing while accumulating miles, data, knowledge, and experience -- all crucial to developing the future of its smart mobility projects.
One such partnership was between Lyft and nuTonomy, which will test a program in Boston to research anything from routing and booking to the performance of the driverless vehicle system. Jaguar Land Rover also invested $25 million in Lyft over the summer to help support its expansion and technology plans, while giving the automaker a way to test its own self-driving vehicles in Lyft's ridesharing service.
Lyft has also inked a deal with Detroit's second-largest automaker, Ford Motor Company (F 0.17%), to work on developing self-driving vehicles specifically for use in ridesharing services. And perhaps the prize of them all was General Motors investing $500 million in Lyft in 2016 with the intention of testing a large fleet of Chevrolet Bolt electric vehicles that could one day be driverless.
Ford Motor Company and Lyft struck a deal to work together on self-driving taxis in 2017. Image source: Ford Motor Company.
As time goes on, the line between smart mobility companies and projects, such as Lyft, automakers and tech companies will continue to blur. While Lyft's rival was focused on damage control throughout 2017, one of the top mobility stories from 2017 went unnoticed as Lyft inked a number of incredible partnerships with some of the industry's biggest names perhaps setting the stage for Lyft to one day become the biggest mobility story around.
Uber doesn't have a monopoly on ridesharing
Travis Hoium: I think it's become clear that ridesharing and autonomous vehicles, likely in tandem, are the future of mobility and that's created a rush for automakers and tech companies trying to be first to market. Alphabet, Uber, Lyft, General Motors, and others are all trying to develop the technology to build an autonomous ridesharing fleet that could someday dominate the industry because, in theory, network effects would take hold. The company with the biggest fleet would attract more riders, leading to a bigger and more technologically advanced fleet, and so on. This is what happened with PC operating systems (Microsoft), internet search (Google), and social media (Facebook), so these companies know that capturing market share is key and can lead to hundreds of billions in value.
Uber seemed to have a huge head start on the competition, simply because it has the biggest ridesharing business in the world. It could roll out autonomous vehicles and leverage them in ridesharing to crush everyone else in the market, effectively giving it a monopoly. And that's why investors have funneled billions of dollars to the company, hoping that it would eventually own the mobility market. But in 2017, the thesis started to fall apart.
When a culture of sexual harassment began to be uncovered at Uber and founder Travis Kalanick was forced out as CEO it gave Uber a black eye to the public. Customers reacted by signing up for Lyft, who stole market share from Uber all year. According to Bloomberg, which obtained documents from a Lyft investor, Lyft expects to increase its ridesharing market share from the low to mid-teens to one-third of the market in just the past year.
Uber founder Travis Kalanick. Image source: Uber Technologies.
This tells us a lot about ridesharing habits in general, which new competitors can take into account. Customers seem more than willing to change ridesharing apps if there's a reason to do so. The move to Lyft was driven by social concerns, so it makes sense that tangible economic factors like lower prices or shorter wait times could attract customers as well.
The ridesharing market may have some network effects, but switching costs are low given the ease of downloading an app. What I think we learned in 2017 is that mobility may not be dominated by one big player like Uber; there may be room for multiple players with the scale to compete, opening the door for Alphabet, General Motors, and Lyft's ridesharing plans over the long term.
