Helsinki’s ambitious Uber for buses experiment has failed. What went wrong?

For a year and a half, a pioneering on-demand minibus service run by Helsinki’s public transport authority let riders choose their own route and summon a trip in real time with a smartphone. Despite big ambitions to drive private cars off the road, the scheme shut down at the end of 2015.

The Kutsuplus (Finnish for “Call plus”) service was more expensive than a bus fare, but cost less than a Helsinki taxi.

Ajelo, a local tech start-up and partner on the project, developed the dispatch system, which was able to constantly adapt routes for each bus, aggregating user requests in real time and calculating journeys to best satisfy all passengers. The city managed the vehicles.

“We proved the technology worked,” said Kari Rissanen, a programme director at the Helsinki Regional Transport Authority (HSL). “[But] we didn’t have the money or courage to go big scale.”

The idea for Kutsuplus came from a research project at Finland’s Aalto University eight years ago, later spun out by Ajelo. The first test phase launched in 2012 with 10 buses. It opened to the public in Spring 2013 with 15 vehicles.

“It had one big problem: its operation costs were too high,” said Teemu Sihvola, the founder of Ajelo. “It was very hard to make profitable. You had the expensive vehicle models. You also had three year fixed contracts for the drivers.”

The service was in competition with Uber, the ride-hailing app which has upended the taxi business in cities around the world. “It wasn’t flexible enough. The cost of hiring drivers was too high compared to Uber,” said Sihvola.

Uber operates a business model which currently classifies drivers as independent contractors, but this is coming under increasing legal fire in countries because of a lack of employee benefits and protections. Another advantage the company has is its huge stockpile of cash, meaning it can currently afford to spend more than it earns (although the company has said it expects to turn a profit in the second quarter of this year).

Politics and the market collide

Serving both public and private masters appears to have been a mixed blessing for Kutsuplus.

With the city’s stamp of approval, the service did not run into the vociferous objections from local officials and cabbies that Uber faces daily.

But the service cut deep into the city’s budget, which subsidised almost 80 per cent of the scheme. “Some trips were €17, €18 or cost a bit more than €20 apiece. That is a big amount of subsidy,” said Rissanen. This was particularly hard to defend for a country entering its fourth year of recession. “In that sense, we had bad luck,” he added.

The economics of the system relied on scale. To be profitable, HSL needed to grow its fleet of vehicles: a minibus becomes more cost-effective with more paying passengers.

“Uber did it, Lyft [another US rival] did it. For a public service, it turned out to be an impossible task,” said Sihvola. The plan was to have 100 vans operating by 2017, then as many as 8,000 over 10 years.

But going whole hog was difficult for HSL, a body with political – as well as market – priorities. In the end, it couldn’t grasp the nettle and stump up the costs of ramping up the service. “I hope someone has the guts to take the concept and try it somewhere else,” said Rissanen.

No public transport revolution for now

The idea has survived, only not in Finland “We’re taking it forward,” said Sihvola. Ajelo was acquired by US-based Split, a car-pooling company, in late 2014 and is now running a similar service in Washington. 

"The experience in Helsinki is a success story because we got to do a pilot. Sometimes it’s just a research paper and no more,” Sihvola said. The Helsinki experiment proved there was an audience out there for a new kind of public transit system, he added, citing a 2013 survey where less than 2 per cent of passengers who tried Kutsuplus said they would stick with other means of transport.

The idea ultimately didn’t prove strong enough to supplant Finland’s buses, trams, trams and ferries. Despite this, Rissanen is open to take on different transport experiments in the future where the role of HSL is smaller. “Maybe we’ll look back and say it was ahead of its time,” said Sihvola.