3 reasons investors should keep a close eye on the carpool market – The Fool Motley



Lyft (NASDAQ: LYFT), the second-largest carpool company in the US, went public earlier this month. During the company's initial public offering, some investors might be wondering what the scale of the car-sharing market is, it's worth taking it seriously and how he could benefit from it.

If you're interested in the carpool market but do not know where to start, here are some reasons why you should pay attention to what's going on in this space and why you need to keep a close eye on what Lyft, Uber, and General Motors (NYSE: GM) made.

A person holding a smartphone with a shared carpool app is open.

Source of the image: Getty Images.

1. Carpool could rise to $ 285 billion by 2030

Many estimates are trying to determine the scale of the car-sharing market, but they all have in common the fact that it will be huge. Morgan Stanley In a research report published in 2017, the global carpool market would cost $ 285 billion by 2030.

A more recent estimate from Markets and Markets indicates that carpool services worldwide will be worth $ 218 billion by 2025. Whatever the estimate becomes more accurate, it is clear that carpooling is a gigantic global industry.

That's why Uber has expanded its operations in nearly 65 countries and recently spent $ 3.1 billion for the purchase of its competitor Careem in the Middle East. Uber's decision to seize a larger international player rather than fighting against Careem on its original territory comes as the global shared carpool market has become much more competitive. For example, Uber could not follow his Chinese rival, DiDi Chuxing, and ended up to divest its activities in China to DiDi a few years ago.

2. Americans' opinions on car ownership change

Americans, especially the younger ones, are much more open to paying for transportation than when they need it, instead of owning a car themselves. And these changing ideas about owning a car will reduce motor vehicle sales in the coming years. IHS Markit the data show that the automotive industry will record a 33% decline in its auto sales between 2017 and 2040.

With nearly 80% of the US population now living in urban areas, worth owning and driving a car in town, finding parking, etc. is not worth it for many Americans. Add to that that cars are unused in 96% of the cases and that many Americans are losing their enthusiasm for the automobile.

GM has seen the writing on the wall, which is why the company currently has a relay sharing service that allows GM owners to rent their cars to third parties. The company also plans to introduce a standalone ridesharing service during the year. While the availability of both programs is limited for some time, GM's bets on stand-alone sharing services and private-vehicle sharing show that even the automotive pillars are looking for innovations to stay relevant .

Two women sitting in a white car.

Source of the image: Lyft.

3. Carpool use is growing rapidly

Morgan Stanley estimates that in 2017, there are approximately 15 million daily trips worldwide and that this will reach 97 million by 2030. Lyft claims to have already made 178.4 million trips in the fourth quarter in 2018, up from 116.3 million in the same period in 2017. And Uber says it makes 15 million trips around the world each day. For reference, the company only made 1 million trips a day just four years ago.

In addition, research conducted by Assurant found that 44% of survey respondents regularly use ridesharing services. All this means that people have been using these ridesharing services, which have quickly become an integral part of the daily lives of many users.

Some thoughts for investors

Lyft is the only pure carpool game currently offered to investors. The company's shares are trading a little less than the original price of its stock during its IPO, and Lyft is facing fierce competition from Uber, which is expected to be released next month.

Meanwhile, GM is likely to enter the carpool market early in the year, but investors should not expect the service to generate significant revenue.

In short, while the car sharing market is gaining momentum, investors still have few options to expose themselves. Uber and Lyft are probably the two best games, but even Uber – with its carpool dominance in the United States and many other countries – experienced an adjusted EBITDA loss of $ 1.85 billion in 2018.

All this means that if the car-sharing sector is growing rapidly, investors will have to play the game long.


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