Just like public transport, and most businesses for that matter, mobility services have been hit hard during the global pandemic, with many shutting down or, in some cases, even pulling the plug.
With a complete lack of demand that stems from lockdowns in cities across the world, new businesses from micromobility to ride-hailing services are struggling to survive. From startups to new mobility divisions from global automakers, it isn’t a good time to be involved in transport. No one could have predicted this shift after such promising growth across the board.
To discuss how these mobility services around the world have been impacted by Covid-19, I sat down (virtually, of course) with Dr Mike Galvin, a recognised thought leader in the taxi, private hire and demand-responsive transport industry.
As an industry veteran with 40 years’ experience in senior management roles in some of the largest on-demand transport operations in the world as well as Transport for London, he is the perfect person to discuss what the future holds for modern transport in a post-lockdown world.
“You don’t need me to tell you that the entire mobility industry has seen demand plummet to almost nothing,” he says. “In the taxi and private hire industry, where I spend much of my time advising and assisting companies and organisations, this devastating decline has been handled very differently by the plethora of organisations, large and small.”
Although some companies and services have acted fast, quickly transitioning into new areas of work, many have had to cut operations in order to save costs and, ultimately, preserve enough cash to get them through these challenging times. As Galvin says, no one has in any way been able to retain the status quo.
“The impact on society generally and business in particular will, of course, be long term,” he adds. “This will necessitate changes to the way the industry operates, where its revenue comes from and an ability to meet those challenges will be the test for survival. There will no doubt be many business and business model failures, some immediate and some in growth when it arrives.”
Protecting The Private Sector
Taxis and private hire services are no strangers to hard times. From black cabs to large rental companies, these companies are hugely dependent on such things as commuters, tourists and business usage – three things that have come to a standstill in the last few months.
However, these businesses are still trying to help out, promoting cheaper and more accessible transport for key workers such as NHS staff. They will generate some money through people traveling to these kinds of jobs, but not enough. For many, this is solely about playing a part in helping the fight against the virus.
“Taxis and private hire companies are hugely dependent upon airline arrivals and departures, commuters, high-end tourists and general business usage. All four of those sectors are now close to non-existent, business-to-consumer has been the popular battleground for new entrants and with lockdown in place that is another sector that has evaporated,” adds Galvin.
However, once we come out of lockdown, these companies will continue to struggle, with demand for mobility services not predicted to return any time soon, due to multiple factors.
Firstly, contamination risks will knock back the development of mobility-as-a-service, forcing people involved in this area, from transport authorities to startups, to quickly adapt their offerings. In some cases, such as premium ride-hailing services, there will be some growth in demand as people try to avoid public transport and shared mobility.
“People are no doubt going to be put off of shared transport, but for how long?” questions Galvin. “Whether booked through MaaS or direct, taxis and private hire may see an initial fillip as shared transport is less popular. Having said that, maybe the more innovative services and suppliers may see a welcome migration from mainstream transport. In short, I don’t see any particular benefit or dis-benefit to MaaS but neither do I see a roadmap to success.”
Covid-19 Or Just Bad Business?
As mentioned previously, we have seen an influx of start-ups in this space over the last few years. However, a lot are on the verge of disappearing due to the added pressure of Covid-19, in addition to operating in a sector that sees little profit.
Galvin is not entirely convinced that the future of start-ups in this space are bound to the pandemic, but that they need to look closely at their existing business models. We have seen much more mobility services close than open. However, he also believes that this could force companies to be more careful with their funds.
“There may be a strange irony that given the profligate entities have not been able to throw money around like a drunken sailor for some weeks, and potentially months, they may experience some of their best months financially for some considerable time,” he says.
“One has to ask what kind of business model actually works better when the door is closed than when it is open.”
“Travel, commuting, international travel will all remain subdued for some time but memories are short.”
The market today is extremely overcrowded and, ultimately, an unprofitable ecosystem. Rivals fight against each other to steal consumers, through promo codes, driver benefits and subsidiaries. Added to the incredible marketing costs and you have yourself one of the strongest arguments for running a sustainable business.
“The B2C market worldwide, that all of these start-ups see as the utopia, is a crowded and largely unprofitable place to be. For example, one organisation is rumoured to subsidise every ride by 60%. So, how long can a business defy gravity for?” questions Galvin.
Fundamentally, the problem isn’t necessarily Covid-19, but the mobility-as-a-service industry as we know it. And all while a global recession looms over.
The Road To Recovery
Despite this, the mobility sector will push on, although it won’t be an easy ride. It will all come down to how agile and innovative a company in this space can be. More than ever, it is important that these services are smarter with how and where they spend their investors’ money.
“Will the mobility sector recover? The answer is yes, but that recovery will be patchy, staccato, and rely on innovation and agility,” adds Galvin. “Transport options that up to now have been in the minority will become mainstream and overall travel will reduce at least over the next two to three years when there will be a likelihood of a full recovery.”
Covid-19 has and will continue to significantly change the way people move, with things such as social distancing and contamination concerns tipping transport on its head. People are going to travel less and in more isolation.
“I think we can predict confidently that change there will be and substantial change as people travel less, at least initially, want to remain safe and public transport radically reduces capacity in order to accommodate social distancing,” adds Galvin.
“Demand for personal transport if deemed safe, or even safer is likely to increase even if overall travelling numbers reduce which they must. It is almost certain that overall travel, commuting, international travel will all remain subdued for some time but memories are short. Once a vaccine is in place, once the Covid-19 news is replaced with the normal nonsense and mask-wearing dwindles, we will I am confident return to normality slowly and stutteringly.”
In short, companies are able to weather the storm and transition into survivors of the mobility industry will eventually see a restored market, where they can, of course, capitalise with less competition. But, with fewer players and new business models, the game is about the change.