How to Invest in the Ride-Sharing Boom

The ride-sharing sector shows no signs of slowing down. This fledgling industry generated an estimated $3.3 billion in revenue in 2015, and annual revenue is expected to top $6.5 billion by 2020.

Those numbers are staggering, considering the industry didn’t even exist 10 years ago. With those numbers, it’s no surprise investors want to get in on the action.  While the future of ride-sharing isn’t certain, it’s more than likely that it will continue to grow.

This growth will be influenced by further technological integrations, open source data sharing, a seamless connection of public transit and ride-sharing services, and governmental policies that promote ride-sharing in favor of decrease in energy consumption. However, investing in the ride-sharing boom isn’t as straightforward as it seems.

The two biggest companies in this field – Uber and Lyft – have yet to go public and can’t be easily accessed by normal investors. Fortunately, there are ways to get a piece of the ride-sharing economy through less direct means.

Investing in the Auto Manufacturers

Auto manufacturers were in something of an awkward spot when ride-sharing services rose to prominence. While cars are obviously needed for such services to exist, ride sharing could potentially lessen demand for cars. Why go through the trouble of owning a car when you can conveniently get a ride for a good price?

While auto manufacturers were leery of getting involved in an industry that doesn’t promote car ownership, they’re now fully on board with ride sharing. All the biggest auto manufacturers are snatching up stakes in ride-sharing services or buying companies outright that can give them a foothold in this growing industry.

If you’re interested in investing in ride sharing, you’ll want to take a look at what these auto manufacturers are doing.

Ford (F)

In early September, Ford announced it acquired the ride-sharing startup Chariot for an unspecified price. The van-based company is currently only in San Francisco, but is expected to expand to at least five more markets in the next five months.

In the announcement, Ford framed the news as a forward-thinking move that will take advantage of shifting demographics. More people are moving into cities – Ford noted that 50 percent of the population lives in cities and that will rise to 60 percent by 2030.

While Ford is smart to invest in transportation rather than simply auto manufacturing, Chariot is a small player in the ride-sharing industry. The acquisition could take a long time to bear fruit.

Toyota (TM)

Uber is the $66 billion gorilla in the room and everyone’s waiting to see when – or if – the industry leader will go public. Until then, the closest normal investors can get to the company is through Toyota. The Japanese auto manufacturer bought a small stake in Uber earlier this year. On top of that investment, Toyota partnered with the company to offer leases to Uber drivers.
The size of Toyota’s investment isn’t presently known, but the deal shows how serious the auto manufacturers are about getting involved in the ride-sharing industry.

General Motors (GM)

The second biggest player in riding sharing is Lyft. General Motors made a sizable $500 million investment in the company in January 2016. Reportedly, GM tried taking that partnership to the next level by acquiring Lyft outright. Lyft, which was open to a sale, turned down the offer.

If the stories are true, then it’s obvious GM is diving headfirst into ride sharing. If you want to invest in Lyft, then investing in GM is probably the next best thing.

Going Public?

As promising as any of the big auto manufacturers might look, investing in them still isn’t the same as investing directly into one of the ride-sharing companies. There’s a lot of chatter about Uber and Lyft going public, yet nothing concrete has been revealed.

If it does happen, you can bet the prices will be sky-high based on hype alone. The auto manufacturers might be boring compared to the promise of ride sharing, yet they could prove to be a more stable and diversified investment.

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