Weekly Brief: Mobility Companies Suffer as Digital Giants Look On

Rental car goliath Hertz filed for bankruptcy last week, laying blame on a “frozen” rental car market that has left its core business in tatters.

Hertz plans to restructure and reinvent itself for the post-pandemic world. First, it has to figure out how to survive while coronavirus continues to wreak havoc around the globe. Filing for chapter 11 protection last Friday was the first step. In the months ahead, Hertz will have to consolidate across its 12,400 worldwide offices and its range of assets, which include other struggling rental car companies like Thrifty and Dollar. The company said it has roughly $19Bn in debt.

To be clear, Hertz’s struggles preceded the pandemic. The company was dealing with an outdated fleet that trended toward sedans rather than more popular SUVs. It was loaded up with debt and reeling from flagging customer loyalty. Tack on a global pandemic that brought the airline and transportation industries to a near halt, and it’s easy to see how this happened.

Still, it’s significant. If you’ve tracked the connected car revolution over the past five years, you’re probably familiar with how Hertz was one of those rental car companies that was thinking about the future of mobility and how car rental companies could become leaders in a new paradigm of transportation. A possible future in which people didn’t own their own cars and instead elected for whatever means of transportation was most convenient at the time. Ride-sharing apps on the fly, car rental companies when people were planning something more substantial.

Hertz was working with the likes of SAP and Nokia to create more personalized, seamless user experiences. Imagine renting a car, getting inside, and finding your own music already in the dash, with roadside recommendations based on your preferences and integrated travel plans and autonomous technology at the ready.

The company was thinking that way. Yet, now it’s underwater and scrambling for a life raft. Maybe in being forced to reinvent itself, it will embrace even more ambitious technologies to usher in the future of mobility faster. More likely, it will cut out all of its leading-edge investments and experimental integrations and strip back to the bare bones.

Others will follow suit. Last Monday 3,000 employees lost their jobs at Uber as the ride-hailing company announced that the pandemic was forcing it to close or consolidate 40 offices around the world. Rather than devote resources to ‘moonshot’ investments like flying taxis and artificial intelligence, Uber said it plans to focus squarely on its core business of ride-sharing and meal delivery. Rumor has it that the company will probably shut down its self-driving car division completely, even though the pandemic has highlighted how useful self-driving cars might be in the future for contactless delivery.

Similar rumors suggest that Apple is considering shutting down its self-driving car division. Lyft has now laid off 17% of its staff, or about 1,000 workers, as it grapples with how to limit operating expenses against the economic hardship of COVID-19. These are dire times indeed. The pandemic won’t wipe out the future of mobility but it will winnow the field significantly. Good news for cash-rich companies like Alphabet and Baidu.

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