Automakers Discover What They Don’t Know About Moving People
(Bloomberg) -- General Motors Co. usually isn’t the place for direct feedback from drivers. Want to purchase a Chevy Malibu or get your Cadillac Escalade fixed? Deal with the local dealer, not the automaker. That’s what makes Maven, GM’s car-sharing app, a warning about learning to please customers.
Consider this one-star review by a user, identified as Jose Z., who complained that the app timed out when he tried to reserve a car: “Nice try GM,” he wrote on Apple Inc.’s iTunes Store, “but you’re trying to play in the wrong field. Stick to big trucks and dealerships, not tech and user experience.”
Other carmakers rushing to embrace this new business model, in which cars are more of a service than a product, have been met with similar complaints: buggy apps that crash or time out, dirty cars that smell like smoke, vehicles that don’t unlock when the driver arrives. Maven, with an average of 4.1 out of 5 stars, is actually one of the better-rated apps from an automaker, even though GM executives readily acknowledge that the service is a work in progress.
ReachNow, a similar car-borrowing app from BMW AG, does even worse with an average three-star rating. Audi AG’s Silvercar gets 2.8 stars on average. A longer-established app from Zipcar Inc. has an average review of 4.6, and ride-hailing apps from Uber Technologies Inc. and Lyft Inc. get 4.7 and 4.9, respectively.
“The automakers have never been good at facing off directly with consumers, and it’s not clear that they will be in the future,” said Eric Noble, president of the CarLab, a consulting firm in Orange, California.
Crabby app reviews might seem trivial for companies whose multibillion-dollar market caps are based on bending metal, not coaxing clicks. But carmakers have rushed to start digital businesses to compete with Uber and other tech-savvy mobility businesses. The looming Waymo taxi service from Alphabet Inc., Google’s parent company, will use an app to match passengers with driverless vehicles.
If carmakers can’t master customer service—which they’ve outsourced to independent dealers for more than a century—then the industrial giants could be relegated to supplying hardware to the digital upstarts that make a fortune in the near future selling transportation services. That’s exactly the fate the manufacturers fear as they pour a collective $60 billion into autonomous research over the next five years, according to consulting firm AlixPartners LLP.
GM is preparing to launch a ride-hailing business using its self-driving cars. The company’s Cruise unit has developed its own app that’s being tested by employees and could end up being GM’s biggest foray into selling rides to the public.
Right now, though, carmakers such as Audi, BMW, Daimler and GM are mostly in the car-sharing business pioneered by Zipcar, which is owned by Avis Budget Group Inc. Customers can use automaker-produced apps to get a car for a few hours or days, and Maven’s Gig service even rents cars to Uber and Lyft drivers. The hourly cost to borrow a car from Maven runs from $10 to $20 an hour. The service is available in 17 cities, enabling customers to reserve a car, drive around and return it to the same spot. The app has 150,000 users, about double the number from a year ago.
BMW’s ReachNow has 85,000 users of its car-sharing service in Portland and Seattle, and the company is testing a ride-hailing service in Seattle. DriveNow, BMW’s European car-sharing service, gets better ratings than its U.S. counterpart. Daimler AG’s Car2Go, a standout with mostly positive app-store reviews, operates in 11 cities.
The tough part is mastering the basics of managing a fleet. BMW recently eliminated public availability of ReachNow in Brooklyn, New York, narrowing the service to residents of a few apartment buildings. In a statement on the company’s website, ReachNow Chief Executive Officer Steve Banfield cited “high damage to vehicles and maintenance costs.”
ReachNow customers have commonly complained that the app is slow, crashes or takes too long to locate a car. One common gripe is that the app often spends a lot of time searching for a car near the user’s current location when the user really wants a car to be waiting at another location. A ReachNow user, maganeko_pdx, wrote that he was locked in the car after its reservation timer expired. He tried to open the door, creating further problems: “So there I was, late for work, locked inside a car with the alarm blaring at 6 a.m.”
BMW spokesman Phil DiIanni said the app “may not be as robust as we’d like,” and added that the company is working to improve the interface and the service.
Maven CEO Julia Steyn said in an interview that the app isn’t the biggest problem—it’s learning to handle the intricacies of managing a fleet and handling customers with problems. “We’re working on it,” Steyn said, adding that in the days when Maven had lower ratings, the top complaint was that the car wasn’t there when a customer needed it.
GM at first turned to the closest approximation of a customer service system inside the company: OnStar concierge call centers. Steyn said Maven is now building out its own support staff with dedicated call centers.
Ratings have improved. In April, Maven had more one-star ratings than five-star ratings; now the app is earning mostly five-star scores.
Daimler’s Car2Go gets good reviews amid its growing pains. The service has pulled out of three cities. Car2Go’s electric Smart cars deployed in San Diego had to be withdrawn when the federal government didn’t build out promised charging stations; it left the market in 2016. The service had similar problems in Miami, where demand for electric cars proved weak.
In Minneapolis, Car2Go folded under the weight of taxes and fees on rented vehicles. “Our business was subjected to extremely high state car rental taxation rates,” said Daimler spokesman Michael Silverman.
That’s another issue for car companies. Sure, they can get the Trump administration to focus on trade or fuel-economy policies, and they do a nice job of lobbying for tax breaks in the states where they have plants. But automakers aren’t as strong as their dealers at the local level, especially in cities where they’ll need cooperation to launch transport services, said Kristin Schondorf, executive director of EY’s automotive and mobility practice.
“Cities can make or break you,” Schondorf said.
Car-sharing might prove to be the wrong business, even as more automakers roll out variations on the model. Porsche’s Passport program, which lets lessees swap out different cars for $2,000 a month, is based on consumers driving the cars. But the real growth is expected to come from ride-hailing services. A recent survey from AlixPartners found that 19 percent of consumers expect to order more rides, while only 3 percent say they’ll increase car-sharing.
“Right now they are wholesalers, not service companies,” said Alexandre Marian, a director with Alix. “The automakers will have to adapt to a changing environment.”
©2018 Bloomberg L.P.