BMW Directly Taking on Uber and Lyft

By Markets Fool.com

BMW (NASDAQOTH: BAMXF) wants to be ready for a world where the concept of car ownership is changing.

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The company has already been slowly rolling out its ReachNow service, a variation on car-sharing, in various major cities in the United States. The program lets registered users pick up a car and then drive it for as long as they want for the seemingly steep price of $0.41 a minute (which the company calls a promotional rate).

ReachNow uses a variety of different BMW and BMW-owned car models including electric BMW i3s, BMW 3 Series, and MINI Cooper vehicles (2-door and 4-door models). All models offered include premium features such as heated seats, moon roofs, rear view back up camera, and more, according to the company, and the $0.41 price includes gas/electricity.

The program made it easy for users to grab a car for a quick trip. Now BMW hopes to expand the program into the on-demand ride model used by Uber and Lyft.

BMW's program uses its own cars including Mini Cooper models. Image source: BMW.

What is BMW doing?

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The company plans to launch a new feature in its ReachNow app in Seattle on Dec. 8. Called "Ride," the service lets people in the test area order a car and driver to pick them up, in much the same way Uber and Lyft operates (and many others).

The BMW service also lets people schedule recurring or individual future rides in a ReachNow vehicle. Unlike Uber and Lyft, the drivers picking people up won't be using their own cars. Instead they will be driving vehicles owned by BMW.

"As the initial test phase continues, ReachNow will expand the Ride service with additional features, including the ability to personalize the vehicle, with temperature and music preferences as well as a "quiet mode" for members who wish to have a more restful experience," the company wrote in a press release.

The ReachNow Ride scheduling feature won't be available until early 2017 and not all ReachNow app users will have access to the pilot program. Members who would like to try it out can request to join the pilot program by emailing ride@reachnow.com.

Why is BMW doing this?

In addition to launching its variant on Uber and Lyft, BMW also announced a few other programs under the ReachNow banner. These include letting Mini owners rent out their cars when they are not using them and allowing ReachNow members to schedule longer car rentals of 2-5 days with special pricing.

All of these programs are being slowly introduced, at least partly because the company knows the market is changing, but it doesn't know exactly what that change will mean for the industry. Basically BMW sees the potential of a day where, at least in major cities, owning cars becomes less common.

"I am certain that we will see more change within our industry in the next 10 to 15 years than we saw in the last one hundred years together," said Peter Schwarzenbauer, Member of the Board of Management of BMW AG. "... ReachNow is a great example of how we are helping shape a sustainable urban future. More than ever we are focusing on our customer's needs by offering individual, premium on-demand mobility, exactly tailored to their demands."

Will BMW succeed?

Luxury, higher priced car sharing and premium on-demand rides seem like niche markets compared to Uber and Lyft's broader plays, but BMW is clearly experimenting here. The company may be behind the two ride-share leaders, but it's ahead of the rest of the car manufacturing industry.

The company is moving slowly and testing a number of models. That should leave it very well-positioned when it becomes more clear how car ownership and ride-share/on-demand rides will work in the future. These are baby steps, but very important ones when it comes to being ready for a rapidly changing market.

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Daniel Kline has no position in any stocks mentioned. He drives a Mini Cooper and does not want to share it. The Motley Fool recommends BMW. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.