If Recession Hits Emerging Markets, Will The Mobility Industry Be Safe?

A prominent VC fund’s analysis suggests that the transportation sector is  more resilient than the traditional tech sector, such as digital solutions, in times of crisis. 

With a recession at the front of everyone’s minds, mobility could become a new safe haven for investors, especially in the rapidly developing markets of LatAm and Asia.

Recently, guil Mobility Ventures — a Santiago-based VC fund, company builder, and a LatAm soft-landing program — analyzed 406 companies. They found that volatility in transportation, trucking, and other mobility-focused industries was 41% lower than it was in traditional software businesses. 

According to guil’s research, many other market segments, such as energy, retail, and hardware, tend to be harder hit by the effects of the economic downturn. For example, a simple weighted average of 2-year and 5-year weekly return regression beta in transportation is 0.78, while it’s 1.35 for electronics. A beta of less than 1.0 shows lower volatility than the overall market, which means it’s less likely to crash when things get unstable. 

The mobility industry has weathered significant setbacks and disruptions during the pandemic. Global road transport activity was cut in half, per the latest UN report. According to USLA Institute of Transportation Studies, public transit ridership dropped by a figure of 50% to 90% in some major metropolitan areas. Many micromobility companies, including bikeshare and e-scooters, suspended operations. 

Now cities are busy again, especially in the bustling emerging markets of LatAm and Asia, and the appetite for international travel is growing. Some industries, such as air transport, are riding the forward momentum of inflation and raising their own prices to compensate for slower business during the pandemic. The ongoing recession might slow things down, but it won’t stop the mobility resurgence. 

In fact, some of the world’s biggest transportation companies and startups were founded during times of economic crisis. For example, William Durant and Charles Stewart Mott founded General Motors in 1908, following the panic of 1906 that left two brokerage firms bankrupt. 

Currently, the Detroit-headquartered company includes brand names like  Buick, Cadillac, and Chevrolet. General Motors also ranks among the leaders in the electric vehicle (EV) segment, leading the field as a COVID-19 champion. The company increased its revenue from $32.5 billion in Q1 2021 to $36 billion in 2022’s first quarter. 

The most recent example includes the crisis of 2008, when the recession lasted for 18 months. In March 2009, Travis Kalanick and Garrett Camp launched Uber, the mobility market unicorn. The founders developed the idea for the app after they couldn’t find a ride in Paris. In May 2022, Uber’s driver supply increased by 78% from its numbers a year ago, and its grocery delivery business reached $4 billion.  

Of course, the mobility market can’t avoid all challenges of the crisis, and many segments are preparing to make necessary changes. According to ACT Research, a mild recession is a likely probability for commercial vehicles. So why do investors remain so adamant about mobility — in particular, in the emerging markets?  

By 2050, the total transport activity worldwide will be more than double what it was in 2015. And the demand for vibrant city life in LatAm and Asia is growing as the younger population comes into full bloom.

Many environmental challenges, including air quality and congestion, have yet to be addressed in the developing world. Most likely, solutions will come from startups and tech entrepreneurs. To meet global sustainability demands, companies and VCs will commit to investing in pioneering transportation tech for developing countries.  

Mobility companies with operations in emerging markets are better positioned to deliver price-conscious products — and make them mainstream. 

For example, India’s biggest automaker, Tata Motors, is a leader in democratizing EVs. Today, their model Tata Tigor EV is one of India's most affordable and best-selling electric cars. 

Countries with the fastest-growing populations could become a global hotspot for zero-emission mobility and sustainable tech. That’s why many VCs are betting high on transportation services, and the mobility sector is poised for growth amid the recession.  

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