Urban mobility investment: the future of the urban transport market
“MaaS is the concept of being able to use mobility tools to buy a number of different trips on a variety of transport modes, but in one place,” says Pietro Strada, Managing Partner at Silverpeak. “You could leave home in a taxi, then jump on the tube, take a train, then finish your journey in another taxi. That is four separate trips, in four different vehicles, at four different prices.”
“But with MaaS, you simply pay once for the entire journey.”
With urban mobility investment accelerating, there is a clear need for innovation and regulation across the urban transport market. Silverpeak has analysed financing and acquisition data across this sector. The findings point to sustained investment and M&A activity in the years ahead.
The case for change in urban transport
The world is urbanising at pace. In 1970, 30 per cent of the global population lived in urban areas. By 2014, that figure had reached 54 per cent. The UN projects that 66 per cent of the world’s population will live in cities and urbanised areas by 2050.
Air quality concerns are growing alongside this trend. According to the World Health Organisation, 90 per cent of city residents breathe air that does not meet safe standards. Transport emissions account for more than a quarter of all greenhouse gases globally.
Connectivity has also changed fundamentally. Five billion people now use mobile phones — 68 per cent of the global population. By 2023, analysts project that one billion of these users will hold a 5G subscription. The infrastructure this creates is essential to the next generation of transport technologies.
Urbanisation, air quality pressure and mobile connectivity are converging to disrupt the urban transport market. That disruption is arriving in three distinct forms: mobility as a service, autonomous vehicles, and shared mobility.
Mobility as a service (MaaS)
At its core, MaaS is a mobility distribution model that brings multiple transport services together on a single platform. Users plan and book trips across different modes in one place.
Across Europe, several operators are already rolling out integrated mobility services. UbiGo operates in Sweden, Qixxit in Germany, and Whim in Finland. Daimler is also testing its Moovel ride-booking service across the US and Europe.
“We have done a number of deals in different areas of what we are now calling the mobility sector,” says David Ford, Director at Silverpeak. “It is relatively new right now, but we think there is a lot more activity to come.”
Transit information providers have raised hundreds of millions of dollars over the past decade, underlining the commercial value in these services. Germany’s GoEuro, founded in 2012, has raised $296 million. Its platform compares and combines rail, car, bus, train and air routes and prices across multiple markets.
Some providers are already moving beyond information into full MaaS delivery. CityMapper uses journey data from millions of users to run an on-demand shared rides service, targeting city areas where that data identifies gaps in existing transport links. The first-mover advantage here is considerable — in the UK and across Europe.
“There is a lot of activity in the MaaS space,” says Matteo Pozzi, Director at Silverpeak. “Many companies are raising significant capital to position for the dramatic anticipated growth in revenues.”
Autonomous vehicles
Mass-market self-driving cars have yet to arrive, but the progress is tangible. Oxbotica — an Oxford University spin-out led by professors from the Oxford Robotics Institute — already deploys self-driving software across cars, trucks, forklifts, pods, shuttles, and mining and construction vehicles.
“Their technology is world class,” says Paddy MccGwire, Managing Partner at Silverpeak. “We started working with them in March 2018, and five months later we completed a £14 million funding round.”
Silverpeak subsequently helped Oxbotica raise a further round in July 2019. While fully autonomous commutes remain some years away, MccGwire points out that private land applications are much closer.
“One airport found they could cut the number of air-side vehicles by a third through automation,” says MccGwire. “That covers everything from the passenger bus and baggage handling to the tug that pushes aeroplanes. The benefits of vehicle automation are real and varied.”
Shared mobility investment
Since the Uber and Lyft IPOs, investors have committed nearly $70 billion across the four largest ride-hailing operators — Uber and Lyft in the US, and Didi and Grab in Asia. Established manufacturers such as GM and Toyota are investing in car-sharing technologies from Turo and Getaround, broadening their model from vehicle manufacturer to service provider.
Silverpeak’s research shows that 2019 investments in ride-hailing, car sharing and carpooling reached an all-time high of $21.7 billion. This reflects a structural shift in how urban residents view transport.
“Millennials in particular live more in cities and buy fewer vehicles,” explains Pietro. “They are more likely to rent a vehicle, use a rideshare scheme or take public transport — and that threatens the traditional automotive OEM business model.”
In response, BMW and Daimler have combined their mobility assets across joint ventures, building scale in urban areas. Bike and scooter sharing are also attracting growing investor interest. Over the past five years, investors have committed approximately $9.4 billion into bike and scooter sharing schemes globally. China leads this trend, with the three largest Chinese operators claiming a substantial share of global fundraising.
However, without regulatory frameworks in place, unit economics have suffered. A high proportion of bikes and scooters sustain damage in operation, and some operators — including Ofo — have come close to insolvency as a result.
“Car ownership in urban areas will decline faster than in rural areas, where people still need their own vehicles,” says Pietro. “We are still many years from mainstream change, but once the trend takes hold, it is too late to position. You need to start well in advance.”
China and the future of urban transport
China is advancing at its own pace and, in several areas, is setting the global benchmark for urban mobility investment. Beyond leading on bike and scooter sharing, China is positioning for leadership in autonomous vehicles. Since 2015, China has invested at least $24 billion more than the US in 5G infrastructure — a critical enabler for autonomous vehicle development. Both Alibaba and Baidu are in advanced stages of self-driving vehicle testing. Alibaba is also exploring smart road technology that feeds real-time data to vehicles as they travel.
“China is investing heavily in AI,” says Pietro Strada. “However, transparency is limited. It is difficult to distinguish what serves political objectives from what delivers genuine economic value.”
Even so, Pietro believes the broader market has much to learn from China’s commitment to urban transport innovation. One conclusion is clear: the landscape is changing faster than traditional industry players anticipated.
“Over the next five to ten years, there will be sustained investment and acquisition activity in the automotive sector,” says Pietro. “Traditional players will either partner with technology companies providing the new infrastructure, or face competition from new entrants with fundamentally different business models. Players cannot afford to stand still.”
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For more information, please contact Pietro Strada.