TaaS Stock: The Next Big Investment?

If you have ever gone skiing, canoeing, or any kind of recreational activity that requires equipment, there’s a good chance you rented it instead of buying it. After all, you won’t use it most of the time, so it doesn’t make sense to have it sitting at home collecting dust.

Transportation as a service (TaaS) is a similar concept. Instead of having a car that sits idle most of the time, you could just hail a ride when you need it. With TaaS, people use a vehicle provided by a third party instead of having their own.

What is TaaS?

TaaS allows you to use a third-party service to plan, book, and pay for multiple types of mobility services. Instead of having your own private vehicle, you use a service that provides a similar vehicle to you as needed.

The U.S. Census Bureau says the average one-way commute time was 27.6 minutes in 2019, which works out to about 55 minutes of commuting each day. Compare that with the 1,440 minutes in each day, and you can see just how little we actually use our cars. For many people, the ownership model may not make sense if TaaS is an option.

Because our cars aren’t in use the majority of the time, it might be better to just fire up an app and find a car nearby instead. Many TaaS services allow you to do just that, including Uber for ridesharing services and food delivery services or Zipcar for car reservations. This new model might make even more sense as more people are expected to live in urban cores in the coming decades.

TaaS could also be a lot cheaper for the average consumer. AAA reported that the average annual cost of new car ownership has increased to $9,282. Compare that with Zipcar, which would cost you about $74 per day. Although that may sound like a lot, if you use it twice per week, that is an annual cost of $7,696 per year. You also pay for a membership, which costs $7 per month. Using these estimates, Zipcar could save you about $1,500 per year. Using this car-sharing model, you also wouldn’t need to deal with car maintenance.

What is TaaS stock?

TaaS stock is stock issued by a company within the TaaS industry that provides transportation as a service. As an investor, you could buy shares of publicly traded TaaS companies from a brokerage. They could provide all the benefits you may get from stocks, such as stock price appreciation and dividends. Some TaaS stocks may even provide voting rights at shareholder meetings.

As a shareholder, you would have the opportunity to participate in the growth of companies in this emerging TaaS market. However, not every new company will be a winner, especially in an industry that is evolving and changing so rapidly. Hence, investing in a TaaS company also means there would be a chance of losing your investment.

Nevertheless, this could be an exciting opportunity as TaaS might change the ways we get around by shaping the future of transportation.

Examples of TaaS companies

There are already many examples of companies in this industry with new ones appearing all the time. Let’s ‌look at a few well-known companies.

Uber

Uber Technologies is the largest ride-hailing service in the U.S. with a market share of 69% as of 2021. The company is listed on the New York Stock Exchange (NYSE) with a $63.88 billion market capitalization as of April 15, 2022.

Its service allows customers to request rides on-demand through the Uber app. It also offers Uber Eats, which is a food delivery service. Uber was founded in 2009, and ridesharing’s market share has already grown to over $85 billion globally.

Lyft

Lyft is Uber’s lone competitor in the U.S., capturing the other 31% of the ridesharing industry as of 2021. Lyft is listed on the NASDAQ and has a market cap of $12.38 billion as of April 15, 2022. It’s also worth noting that like Uber, Lyft also has bikes, scooters, and car rentals. Unlike Uber, though, Lyft hasn’t consistently turned a profit in recent quarters.

DoorDash

DoorDash is an online food ordering company that delivers food directly to you from any of its participating restaurants. A dominant player in the industry, DoorDash makes up more than half the market on its own as of 2021. Its quarterly revenue tops $1 billion, though the company is not yet profitable.

Hertz Global Holdings

Hertz is the second-largest rental car company in the U.S., after Enterprise. The latter is not publicly traded, but Hertz is. Hertz is a traditional rental car company and offers services through its divisions, which include Dollar, Rent-a-Car, and Thrifty.

Bird Global, Inc.

Bird is a micro-mobility company offering rides on both e-scooters and bikes. It operates in 350-plus cities globally in the U.S., Canada, Europe, and the Middle East. It also sells its Bird One scooter directly on the company website.

Reasons to invest in TaaS stocks

There could be several reasons it might make sense to invest in TaaS stocks. Whether your motivations are values-based or mainly wealth-building, these stocks could be a smart investment.

TaaS is an emerging industry

As mentioned earlier, transportation as a service represents an emerging industry. Although that means there might be uncertainty about how exactly things will unfold, it also means there could be opportunities. We have already seen some industries change with the emergence of 21st-century companies. Amazon changed the way we shop, and Netflix changed the way we watch movies and TV.

And TaaS has already started to create similar changes in the transportation industry. In many cities, we can request an Uber where we may have had to wait for a taxi in the past. Even newer developments, such as self-driving cars, may in the future mean there won’t even be a human driver in the ride we request.

Benefits the environment

TaaS isn’t always an environmentally preferable option, but it often could be. E-scooters and electric cars, for instance, are entirely electric and give riders a zero-emissions way to get around. Although we haven’t yet seen Tesla’s robo-taxi service come to be, that would give ride hailers yet another way to get around using autonomous electric vehicles without pumping CO2 into the atmosphere.

These shared vehicles also create the possibility of reducing the number of cars on the road. Fewer individuals own cars, and the ones that do are in use most of the time. This may lead to the possibility of fewer parking lots and other paved areas, and more green spaces and parks in their place. Hence, we could capture CO2 in the spaces that used to be occupied by cars sitting still most of the time.

Remote work reduces the need to own

Transportation as a service is not just a passing fad. In addition to the benefits of TaaS, many people may simply not need to own a car in the future. For instance, it’s estimated that 25% of professional jobs in North America might be remote by the end of 2022.

Without a daily commute, the need to own a car drops considerably. Of course, you may still need transportation to buy groceries or household items, ‌but it may be possible to use a service like Zipcar.

Risks of TaaS stocks

We wouldn’t want to give the impression that investing money in this growing industry is without risk. Here’s what you should keep in mind as a potential TaaS investor.

Not all players will be winners

When there is an emerging industry, there usually is a lot of excitement. That could lead to a lot of hype for investors, some of which may not be justified. The biggest thing to keep in mind is that this industry is loaded with startups.

The natural life cycle of a startup involves losing money for a few years (sometimes longer) before turning a profit. But that doesn’t always happen, and companies that fail to turn a profit may eventually go out of business.

Outside factors could play a role

Transportation is an industry that has been dominated by fossil fuels since Ford began mass-producing the Model T in the early 20th century. As a result, fossil fuel companies are the main competitor of the much newer companies that provide renewable energies.

The competition between the fossil fuel industry and the renewable energy industry may play out in several fields, one of which might be the TaaS industry. TaaS companies base their services on different energy technologies, and the way this competition plays out could determine the fate of these companies.

How to buy TaaS stocks

Buying TaaS stocks is simple. There are many ways you could buy them, such as buying individual shares or as part of a mutual fund or exchange-traded fund (ETF).

You could use your broker of choice to make such purchases. If you want to invest in a single company, you could also search for its name or exchange ticker to add it to your portfolio. It helps to make sure you choose one of the best brokerage accounts or best investment apps.

Alternatively, some of these companies may be on the list of the largest 500 U.S. companies, meaning you could find them on S&P 500 ETFs and mutual funds. Additionally, all publicly traded companies could be found in a total stock market index fund, which provides another option.

FAQs

Bottom line

TaaS might be changing the transportation industry as we know it. App-based services make it easier than ever for people to reserve vehicles whenever they need them. Hence, this new industry could be an exciting opportunity for investors.

Although no industry is without investment risk, early adopters might stand to gain the most (but potentially lose the most) as the winners and losers are determined.

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