Deutsche Bahn’s rival wants to invest a billion euros in new trains.
(Photo: imago images/Sabine Gudath)
Flixmobility is breaking with its basic business model: the company behind Flixbus and Flixtrain has so far only provided the sales and marketing platform, subcontractors bought trains and buses and employed the drivers.
With the purchase of the US icon Greyhound, buses and drivers were also taken over. Flixmobility is also considering buying its own trains on a large scale. The German mobility start-up softens the platform idea. Because in order to become the global market leader, the company needs more flexibility – and well-established operational processes in new markets.
Flixmobility’s original “asset light” strategy, in which companies keep onerous real assets off their balance sheets, has many advantages. On the one hand, it enables rapid growth. The companies can put their entire capacities and resources into sales and marketing.
On the other hand, the approach promises good profits once the market has been conquered. The best example of a successful asset light strategy is Apple. The IT giant does not build its own devices, but focuses on development and sales.
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The approach helped Flixmobility to occupy important markets in the first few years. In a very short time, the young company became a monopolist on the German long-distance bus market – which it helped to build up at the same time. Flixmobility also survived the interim transport stop in the corona pandemic almost unscathed thanks to the low-material strategy.
However, the model cannot ultimately be transferred to the mobility industry.
Own trains increase flexibility
Because the goal of the three founders is global market leadership. The subcontractor system is much too slow to set up this way. That’s why Flixmobility bought Greyhound. It would have taken many years to set up a sufficiently large network in the USA with only the help of bus partners who ensure operation.
The idea of acquiring your own trains is also logical. As a platform, Flixtrain will soon reach a size that allows management to flexibly use the new device where it has the greatest effect. As good as the idea is to have train operations handled by external partners, the system harbors a certain risk of inertia. A growing company cannot afford that, while politicians all over Europe want to strengthen rail transport.
In addition, Flixmobility is not giving up the “asset-light” model entirely: the trains are to be financed by external investors. They will not appear on the company’s balance sheet as a tangible asset. And buying trains doesn’t mean operating them yourself. The partners can continue to do this.
More: Flixtrain plans to invest billions in new trains