Three factors shaping a new transport revolution

Posted by MIRA Funds

15 Mar 2019



01   Overview

02   Factor one

03   Factor two

04   Factor three

Overview

Ride-hailing apps, electric vehicles and driverless car technology will combine to produce a revolution in urban transport over the next 20 to 30 years.

In the process, they could deliver a safer, cleaner and cheaper transport network that could ultimately challenge the dominance of private vehicle ownership, according to Macquarie Infrastructure and Real Assets Economist, Daniel McCormack.

 

Factor one: the ubiquitousness of ride-hailing

McCormack notes that the first step in this process is already well underway in many of the world’s cities. “People are increasingly using ride-hailing apps such as Lyft, Uber and China’s Didi Chuxing, often at the expense of traditional taxi services,” he notes.

This trend is more pronounced in some parts of the world. Between February 2012 and May 2018, the number of New York taxi rides fell from close to 500,000 to around 300,0001. In London, the number of iconic black cabs driving the city’s streets fell 5.3 per cent in the two years to 2017, while the number of private hire vehicles, including ride-hailing vehicles, grew 39.3 per cent.2

 

Factor two: the growing popularity of electric vehicles

If this trend continues it will change the pattern for purchasing and using motor vehicles, McCormack explains.

“Instead of each dwelling having one or two cars in the garage, you’ll effectively see one Uber or Lyft vehicle servicing multiple households. There will be fewer vehicles, but those vehicles will be driven more frequently.

“This is where electric vehicles (EVs) will have an increasing advantage over internal combustion engines (ICEs).”

EVs currently have higher upfront costs than vehicles running off ICEs, mainly due to the cost of the battery. However, thanks to a much simpler engine and fewer moving parts, they tend to be more reliable and have lower per mile costs.3 This makes them a more cost-effective option for car owners that drive a lot of miles.

McCormack says that this advantage is almost certain to become more pronounced in the coming years, as advances in battery technology mean EVs will be acquiring more range as prices fall.

“Many analysts expect that in the US, China and Europe, EVs are likely to be cheaper than ICEs on a total cost of ownership basis, even without subsidies, by the mid-2020s,” McCormack says. “The result will be a decline in the average cost of a car trip, especially for frequently driven vehicles such as those used by ride-hailing services.”

“Autonomous vehicles are a natural fit for ride-hailing and once labour costs are taken out of the equation the per kilometre cost of transport potentially becomes very low.”

 

Daniel McCormack, Economist

Factor three: the rise of autonomous vehicle technology

To really reduce the costs associated with ride-hailing, one final cost needs to be removed: the driver. This is where McCormack believes driverless car technology will become the third and final stage in reshaping the future of urban transport.

“Autonomous vehicles are a natural fit for ride-hailing and once labour costs are taken out of the equation the per kilometre cost of transport potentially becomes very low.”

When that happens, ride-hailing won’t just displace traditional taxis, it should mean private transport begins to compete with public transport on price. However, unlike the current tradeoff where choosing private transport over public means greater pollution and CO2 emissions, the electricity powering EVs could potentially be provided by entirely renewable sources.

This means governments around the globe should find it easier to meet their emissions reduction targets. However, that, in turn, will open up new policy challenges.

“Most governments rely on taxing fuel as a revenue source,” McCormack says. “If their ability to do so is curtailed, they may need to find a new revenue source to replace it.”


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1 New York Taxi and Limousine Commission

2 UK Department of Transport

3 Forbes report: Electric Vehicles cost half as much to drive https://www.forbes.com/sites/jeffmcmahon/2018/01/14/electric-vehicles-cost-less-than-half-as-much-to-drive/#53b655303f97

 

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