By Rebecca Sands, Content & Project Manager, Autonomy

Click here to watch a recording of “Your Next Ride-hailing Trip Could be Electric” held in partnership with BloombergNEF.

According to BloombergNEF’s October 2020 report “Ride-Hailing’s Electric Moment: Policy and Strategies,” over 85 million rides were being taken per day prior to the onset of the COVID-19 crisis. With such a strong penetration in transportation markets worldwide, industry players and consumers alike understand that ride-hailing companies have significant carbon footprints to be reduced. Although many of these companies such as Uber, Lyft, and Cabify have set explicit targets to fully electrify their operations or incentivize and educate drivers to switch to electric vehicles, there still exist a number of significant hurdles on the path to a fully electrified ride-hailing industry.

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Discussing a range of factors such as ownership structures, fiscal and policy incentives, and the optimization of vehicle charging networks, experts Andrew Grant, Senior Associate at BNEF, Urška Skrt, Mobility Manager at World Business Council for Sustainable Development, Alex Prokofjev, Director of Corporate Development at Bolt, Matthew Richardson, Director of Electrification at Uber, and Shana Patadia, Director of Energy Solutions at ChargePoint joined the Urban Mobility Company for the first in a three-part workshop series in partnership with BloombergNEF entitled “Your Next Ride-hailing Trip Could be Electric”. Here are the discussion’s key takeaways.

Reducing the up-front cost to drivers

For all participating panelists, reducing the up-front cost of owning an EV is essential for the industry’s electrification efforts. Given that most companies are operating under structures that are influential rather than directly controlling of driver vehicle choices, how can ride-hailing companies create the right programs to assist their employees in EV adoption? Based on data from Bolt, recent studies show that 80% of their drivers are wanting to make the switch to an EV. However, looking at ownership patterns, 70% of Bolt drivers own an internal combustion engine (ICE) vehicle, where 30% lease one. For EVs, this trend is the opposite. As ownership is key for the consistency of EVs in the ride-hailing market, it can therefore be gathered that one of the root causes of slower EV adoption is the associate up-front costs. For Uber, one successful example has been the creation of funding schemes that take a portion of every ride to contribute to the purchase of an EV. To date, over £100 million have assisted drivers in their up-front EV costs in London.

Yet for Matthew Richardson, although schemes like Uber’s to assist drivers with this challenge are essential, they are not a cure-all solution. Despite up-front expenditure being the initial and perhaps most significant hurdle, it is also essential to consider entire lifecycle costs and factor in other support schemes like long-range options, charging availability, and secondhand models. For Alex Prokofjev, one solution for new EV entrants that has worked particularly well is a rent-to-own scheme, where drivers have relatively flexible terms to stick with a contract for 3-5 years until they become the EV’s owner. Echoing the need for innovative ways to support driver costs, Urška Skrt added that rental-to-ownership opportunities help drivers to better understand the economic tradeoffs and total cost of EV ownership throughout the full lifecycle of the vehicle, ultimately bringing EVs closer to the end-user.

Ride-hailing as a positive externality for other use-cases

For Urška, because ride-hailing has already been proven as a viable EV business due to its ability to exploit the total cost of ownership in terms of mileage – as EVs make most sense from an economical and environmental perspective as the vehicle’s usage grows – it also has the potential to scale-up and bring positive externalities for other use cases. Chiefly among them is the potential for ride-hailing’s positive spillover into the secondhand EV market, which remains grossly untapped. In addition, ride-hailing could help lower the cost of EV tech, develop atypical charging markets, and provide crucial data towards the greater roll-out of charging stations and their usage. Given the success of the industry as a whole, there is significant potential for ride-hailing to bring confidence to investments in overlapping industries such as real estate and energy.

Aligning charging infrastructure with use patterns

As a distinct customer category, ride-hailing runs the gamut when it comes to charging needs – drivers may be charging their electric vehicles at home, in city centers, en route during their shift, and perhaps in the future, at dedicated depots. A customer profile that is representative of many different needs, ride-hailing drivers benefit from built-up charging infrastructure in any of the above locations.

The majority of workshop respondents (47%) felt that access to home and public charging were equally important, although residential charging has proved to be much easier in single family homes. Many ride-hailing drivers, often living in city centers or multi-unit buildings, are not able to access this option as easily. Yet because of the profile of ride-hailing, and drivers’ needs to optimize time for maximum economic gain, there is a strong need for as much charging as possible en route – and in 2018, only 5% of EV charging was occurring in public locations (Transport and Environment).

For Shana Patadia, there are endless opportunities to increase this much-needed infrastructure by finding and aligning charging profiles that complement each other. To do so, charging providers need to work closely with ride-hailing companies to understand driver needs and fill the gaps. “At the end of the day,” explained Shana, “what really matters is how the driving behavior changes. It is definitely important to have things like larger batteries, longer ranges, and faster charging capabilities, but at the same time, it is crucial to understand what driver behavior is looking like and how we can match that through infrastructure.”

Incentivizing use over purchase

Given the significant carbon footprint of ride-hailing, the panelists expressed frustration in the fiscal incentives structured around EV adoption, in that subsidies are often aimed at individuals rather than fleets. With a financial framework that is not suited for the industry, this has, according to Alex, resulted in EVs being less attractive for ride-hailing drivers.

For Matt, this challenge is rooted in the fact that fiscal and policy incentives do not recognize that the greatest climate benefit is through vehicles that are driven the most, not the purchase of the vehicles themselves. Although it is not always easy to find a financing structure that works well, mileage is where incentives will have the strongest environmental and economic impact. As ride-hailing is a market where vehicles are being driven constantly, there is a disproportionately large benefit in the sector to incentivize use rather than purchase. “Look at road taxes, for example,” underlined Matt. “These schemes, where the goal is decarbonization, are trying to disincentivize use, not purchase. From a climate perspective, those who use vehicles the most should be encouraged to move the quickest, whether it is logistics, or ride-hailing, or any other industry.” Existing incentives built around purchase rather than use also inhibit the uptake of secondhand EVs, an important emerging market for ride-hailing drivers, as most subsidies are only aimed at new car purchases.

An ecosystem approach to EV leadership

Given that ride-hailing sits at the intersection of many cross-over industries and mobility objectives, the panelists were in agreement that its role in leading the EV revolution will only be through an ecosystem approach. “For me, my dream scenario is that local governments, ride-hailing platforms, carmakers, leasing companies, and charging providers all come together to look at friction points in the market,” said Alex. Other panelists echoed the need for collaborative strategies in order to optimize incentives, share investment costs with all stakeholders, and ultimately increase the uptake of EVs in the ride-hailing industry so that society as a whole has more opportunities to interact with these types of vehicles. “One positive externality I see is that there is a piece of ‘EV equity’ through ride-hailing,” Shana highlighted. “The more exposed riders are to EVs, and the more opportunities they have to check them out for themselves, see how they work, and discuss with drivers about their experiences, the more it is going to catch on.”

For Bolt, one of their key aims is to reduce not only emissions coming from ride-hailing, but to reduce congestion and the number of vehicles in the city. Ride-hailing has never been nor will never be the sole solution to electric or shared mobility, and these companies have a strong role to play in realizing a truly multimodal transport system. One immediate solution is micromobility, given the amount of capital that has been invested in the sector, or better collaboration with public transit networks to fill the gaps. Although polling showed that most workshop respondents were not convinced that ride-hailing would play a leading role in vehicle electrification over the next decade, as with most things, the future looks brighter together.

Click here to watch a recording of “Your Next Ride-hailing Trip Could be Electric” held in partnership with BloombergNEF.