Inside the abrupt shutdown of BMW’s ReachNow car-sharing service in Seattle and Portland
ReachNow’s 75 employees learned they were losing their jobs just hours before the company told customers that the car-sharing service was shutting down. The Seattle Department of Transportation, which permitted ReachNow to operate on city streets, had only a few hours of lead time ahead of the general public.
The closure was so abrupt, ReachNow included instructions for customers driving one of their free-floating BMWs at the time they received the email.
“If you are in an active rental, do not fear,” the email said. “Please end your trip in the coverage area as normal when you are done.”
The news of ReachNow’s sudden demise on July 17 left many open questions. What happens to the BMWs parked all over Seattle and Portland? Why did a service that seemed popular with customers shut down just three years after launching? Why does car2go, another car-sharing service under the same umbrella, live on?
It’s a case study in the challenges of operating new mobility services in urban areas. It’s also an illustration of the uncertain future faced by many of these services, even as they transform our cities and reshape the larger transportation landscape.
ReachNow had a unique vantage point on the market, operating both a free-floating car-sharing service, with vehicles driven by end users; and a ride-hailing service, competing with Uber and Lyft. GeekWire talked with current and former ReachNow leaders, employees, customers, city transportation officials, and others to get the inside story of the abrupt closure. Here are the key takeaways from our reporting.
- A joint venture between the mobility arms of two giant European automakers — BMW and Daimler — left ReachNow without a distinct role to play in the larger operation, contributing to the decision to end the service in the face of growing competition. ReachNow became a casualty of a complex reshuffling of the two companies’ mobility businesses.
- ReachNow did not have a plan for the cars before it shut down. City officials are evaluating the situation and considering potential modifications to future permits for similar services. The cars will likely be sold at auction or in another venue.
- The founding CEO of ReachNow describes the shutdown as a missed opportunity. Former drivers for ReachNow Ride, the company’s former Uber and Lyft competitor, fault ReachNow’s marketing decisions for contributing to its larger problems.
The joint venture
In February, Daimler (which owns car2go) and BMW (which owns ReachNow) agreed to pool their resources and create a $1 billion joint venture called YOUR NOW.
Under the joint venture, there would be five distinct companies. Creating those companies required a series of mergers. One of them combined ReachNow and Moovel, a startup that creates apps for city transit authorities that allow travelers to book various modes of transportation in one place. Another merger combined car2go with BMW’s European car-sharing service, DriveNow.
The new ReachNow/Moovel company is called REACH NOW. Same name, new syntax. The new car2go/DriveNow company is called SHARE NOW. Both REACH NOW and SHARE NOW operate independently from one another.
The distinction between the two companies is the reason car2go remains operational while ReachNow is no more, according to Laura Gonia, ReachNow’s head of marketing. Daimler and BMW’s leadership wanted to give each of the five companies “a little more focus,” she said. In the REACH NOW group’s case, that meant cutting the car-sharing side of the business.
“As part of this realignment, it was decided that REACH NOW would focus on the development of a multi-modal platform and cease operation of car and ride hailing services in North America,” said REACH NOW CEO Daniela Gerd tom Markotten in an email.
Gerd tom Markotten said the company wanted to inform staff and customers as quickly as possible because REACH NOW was concerned it would not be able to maintain the same level of service for customers if it prolonged the process.
“We ultimately decided that given that Seattle and Portland are vibrant markets for mobility between other car sharing services, free floating bikes/scooters and public transit, that the community had enough alternative options that the community would not be overly burdened,” she said via email.
Early on, ReachNow operated free-floating car-share in a third market, Brooklyn, but ended service there in May 2018.
Asad Hussain, an emerging technology analyst with PitchBook, said he was not surprised to see ReachNow shut down, “as the joint venture was bound to consolidate its carsharing services at some point.”
“We’ve seen increased partnerships and M&A activity across mobility, especially in the rollout of shared mobility services and the development of autonomous vehicle technologies,” Hussain said. “Automakers and technology companies are choosing to partner to hedge against risk and reduce costs associated with these capital-intensive business models.”
The abrupt end
The Seattle Department of Transportation was as surprised as customers to learn ReachNow was discontinued, according to Becky Edmonds, the city’s car-sharing program manager. SDOT learned the service was shutting down a few hours before the email went out to the public. Edmonds said ReachNow’s car-share permit is still active and the company is “working diligently to get the vehicles off the streets.”
“Every year we make some modifications to the permit conditions,” she added. “We’ll think about this as we’re making 2020 permit conditions.”
Wow, @reachnow notified users _today_ that they’re shutting down _today_. The announcement took into account that people were likely using a ReachNow car when they found out. That is about as abrupt as it could have possibly been.
— KHG (@kristenhg) July 18, 2019
ReachNow did not have a plan in place for the 1,000 free-floating cars it operated across Seattle and Portland before shutting down the service. Following the announcement, Gonia and other members of the leadership team began brainstorming what to do with the vehicles.
The company enlisted the workers it uses to fuel and clean the cars to pull them off the road and identified a few nearby parking lots where they could be stored temporarily. Cars still remain on roads throughout Seattle.
What’s happening with the 1,000 BMWs lining the streets of #Seattle, @reachnow? Just going to take our parking spaces? ?
— krlayton (@krlayton) July 21, 2019
Gonia noted that it will take some time because BMW has to send a driver to pick up each of the 750 cars on Seattle streets.
Gerd tom Markotten (REACH NOW’s CEO) estimates that 90 percent of ReachNow’s cars were removed from the streets of Seattle and Portland within two weeks of the closure announcement.
ReachNow is considering selling the cars at auction or through other avenues. Gonia will stay on for a few months to help with the wind-down before moving on. ReachNow employees were not offered opportunities to join the Moovel team.
“To know that everything happened and stopped very quickly was jarring but the support and the community of the team here really speaks to the quality and passion of what we were building,” Gonia said.
Last week, Moovel North America CEO Nat Parker announced he is stepping down from the company, in a LinkedIn post. “I’m ready to start working on my next venture and put together a team to build something special once again. I would like to thank Daimler and BMW for the opportunity to participate in their efforts to rethink urban mobility the last four years and look forward to what our people do next,” Parker wrote.
A ‘missed opportunity’
Six months before ReachNow shut down, founding CEO Steve Banfield left the company as BMW and Daimler were forming the YOUR NOW joint venture. That’s when Gerd tom Markotten took the helm of the newly combined REACH NOW as CEO. Gerd tom Markotten was previously CEO of Moovel Group.
Banfield called the decision to shutter ReachNow a “missed opportunity” in a LinkedIn post following the news. While ReachNow was not yet profitable, he told GeekWire, that was “similar to many services where you need to invest to continue to grow and scale the business.”
What’s more infuriating with @reachnow shutting down is that I’m essentially left with car2go as the only other option. And their product and pricing is significantly worse. ??♂️
— Sterling (@_five_oh_three) July 18, 2019
“We got great reviews,” he said. “We got very positive word of mouth. People were very big fans of the service.”
REACH NOW had 6.7 million customers in the first quarter of 2019, according to Daimler financial documents. That includes customers of Moovel and the ReachNow car-sharing service. The group added nearly 1 million customers over the next few months, finishing the second quarter with 7.5 million.
But ReachNow also had its challenges. As Daimler and BMW were forming the joint venture, another competitor entered the Seattle market. Lime expanded its service in Seattle beyond bike-share to include free-floating cars called LimePods.
LimePods offered a cheaper option than the existing competitors. It costs 40 cents per minute to drive a LimePod versus 45 cents for ReachNow and car2go. Lime does charge $1 to unlock the car, however.
Lime Director of Strategic Development Jonathan Hopkins said the LimePod service is seeing steady growth in Seattle. “We’re extraordinarily happy with our product,” he said.
ReachNow was also known to have technical difficulties. Customers using the app sometimes struggled to connect to the ReachNow service to end their trips via the app after parking. Customers last month were bombarded with push notifications that were part of an internal test.
You alright @reachnow? pic.twitter.com/jX8kuaYTaP
— Michelle Baruchman (@mlbaruchman) July 3, 2019
Sometimes testing goes awry. If you received a push message (or several) from us today, our internal team was testing a new feature and accidentally pushed to production. No one is more embarrassed than us ?
— ReachNow (@reachnow) July 3, 2019
And then there was Ride, ReachNow’s short-lived competitor to Uber and Lyft. ReachNow suspended Ride in May when EcoService, the Vancouver, B.C.,-based vendor that supplied the drivers, said it would no longer operate in the U.S.
Former drivers for the contractor said business was slow. “There were no rides,” said Nathan Messer, a former driver for ReachNow Ride. “I would honestly go sit for an eight-hour shift in a running car and get no ride requests the entire time.”
Messer attributed the lack of riders to poor marketing. “They never generated the right demand,” he said.
Another EcoService driver, Victor John Liss Jr., echoed Messer. He said he was not surprised when ReachNow’s car-sharing business shut down because of the company’s “lack of effective marketing and inability to recruit members.”
“I really think ReachNow failed due to a lack of direct marketing,” he added. “They bombarded the internet with ads but neglected to meet the commuter on the street, at the ferry terminal, the symphony, Westlake Plaza, the area farmers’ markets.”
Liss Jr. sent a letter to ReachNow’s Seattle leadership team expressing frustration over EcoService’s abrupt end. “Eco-Service is of course responsible for its poor fiscal management, but I maintain a greater share of the responsibility for the failure of this program rests with the management of ReachNow Seattle,” he wrote.
ReachNow’s Gonia said that “the shut down had nothing to do with the performance of the ReachNow business,” adding that member growth was at least 25 percent each year of operation.
Despite some bumps along the road, Banfield said that ReachNow’s demise could have been avoided. He thinks the service could be operational if ReachNow had been merged directly with car2go, into the joint venture’s car-sharing group.
“If it had been merged with car2go then this might not have been the outcome,” he said. “It was merged into a mobility-as-a-service vision that was interesting and made a lot of sense on the one hand. On the other, it didn’t really fit because it was not part of Moovel’s core business to be a service operator.”
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