Tue.
Jan 18
2022
shared mobility
Image: Yandex

Shared mobility markets in Russia could grow by over 50% in the next five years, meaning good news for services provided by U.S.-listed Russian tech giant Yandex, JP Morgan said in a recent note.

Ride-hailing and car-sharing markets could reach about RUB 1.4 trillion in 2026 from about RUB 0.9 trillion in 2021. And that’s only a small portion of the total addressable transportation market in Russia, “representing a huge growth opportunity for the shared mobility industry,” according to the note.

Free-floating car sharing is considered the next wave of urban transport, as the average car spends 90% of its time parked. Widespread use of mobility apps in a city can reduce traffic by cutting the number of cars on the road, allow for more urban green space by reducing parking needs, reduce emissions from unnecessary rides and improve quality of life.

The other reason it is seen as the next wave of urban transport, is because it enjoys Russian government support and encouragement related to the reasons above, according to the note. Yandex, whose Yandex.Drive business provides investors exposure to the segment, has taken the bit between its teeth and is pushing ahead. 

For the moment, the value in Yandex car sharing has been in building a customer base that also uses ride-hailing services, according to JP Morgan research, which was the bank’s first specifically on Yandex’s ride-hailing segment.

“Yandex is using B2C carsharing to impact consumer habits, which should eventually lead to further expansion of the ride-hailing (taxi) customer base,” according to the note. At the same, time the real earnings in car sharing at the moment come from corporate clients, which will likely account for 80% of Yandex.Drive earnings (EBITDA) by 2026, the bank noted.

Yandex management sees large growth opportunities in the business-to-business segment of car sharing. This is tied to the rapidly evolving e-commerce and the need for delivery services, according to the note.

Yandex.Drive occupies about 36% of the total market in Russia with about 17,200 cars. Delimobil, which has yet to go public, holds the largest market share at 38% of the total, with about 18,000 cars.

Other players who also plan expansion include BelkaCar and CityDrive, which account for about 12% and 10% of the domestic market, respectively.

Profitability, however, remains elusive due to higher fuel prices, car repair and maintenance costs. At the moment, Yandex.Drive, DeliMobil and others are barely breaking even or making a loss, according to JP Morgan. And the strong state support, while a benefit to development, also constitutes a potential regulatory risk. Decisions such as potential increases in the price for parking permits could rake back gains in the future.

JP Morgan has yet to get too excited about the ride hailing sector, even as it acknowledges the huge growth opportunity. It values the mobility portion of Yandex at $500 million.

On the other hand, JP Morgan views Yandex itself as an attractive buy, “among our favorite plays on the Russian consumer and domestic internet.” The initial research into car sharing shows at the very least that it has gotten the bank’s attention as a future segment.

Growth in ride-hailing and car sharing is underway in Moscow and globally. There is no doubt about the huge growth opportunity. The future appears to be anyone’s to gain. Yandex and DeliMobil have been most aggressive at bagging market share, with still much left to play for – including the race for profitability.

The winners of this trend should not only be investors but city dwellers themselves, who gain cleaner, cheaper and more efficient transport options.  

By Stephen Bierman

Stephen Bierman is an energy markets journalist and the editor of New Economy Observer.

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