Natalie Huang- Carlson School of Management, University of Minnesota

Economic & Environmental Implications of Ride-Hailing and Vehicle Age Limits for Cars Sales Markets

Ride-hailing poses significant challenges to OEMs as it offers an affordable mobility option, and thus may lead to lower new car ownership. Yet, its more intense competition with the sales of used cars in secondary markets (as they are both low-cost mobility options) may reduce the cannibalization of new car sales to consumers, and therefore benefit OEMs. Moreover, ride-hailing creates additional new car demand for OEMs from drivers providing service on ride-hailing platforms. With these complex interactions, the effects of ride-hailing on the car sales markets and associated environmental impacts are not clear. Meanwhile, recent practices also indicate that ride-hailing platforms may impose vehicle age limits to increase the quality of cars providing service. A vehicle age limit may increase the total new car sales as it increases the drivers' new car purchase frequency; however, as it requires drivers to replace their used cars with new ones, it also creates another source of used car supply to secondary markets, and thus may increase the cannibalization of OEMs' new car sales to consumers. In this paper, we establish a game-theoretic model to endogenize these interactions by accounting for the durable nature of cars and the effect of secondary market. We show that ride-hailing can in fact lead to higher new car ownership among consumers and total new car sales for the OEM; it can also increase the total environmental impact, despite its perceived environmental benefits from usage pooling. Moreover, despite increasing the quality of ride-hailing cars, vehicle age limits can lead to higher profit and total new car sales for the OEM; they also reduce the total use impact of cars.

Natalie Huang

Natalie (Ximin) Huang is currently an Assistant Professor of Supply Chain and Operations at the Carlson School of Management, University of Minnesota. She received her Ph.D. in Operations Management from the Scheller College of Business at Georgia Institute of Technology.

Natalie focuses her research on sustainable operations and supply chain management. Her current projects study the economic and environmental implications of various environmental regulations, such as waste management and carbon emissions regulations. She is also interested in exploring how firms’ sustainable operations strategies, such as sharing economy business models, durable product resales, and product offering strategies to serve less-privileged populations, can be designed to improve their efficacy and contributions to the triple bottom line. Her research has been published in OM journals such as Management Science, Manufacturing & Service Operations Management, and Production and Operations Management. 

Ximin (Natalie) Huang | Carlson School of Management