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Image from https://www.smartcity-dialogues.com/

Urban Mobility Landscape 2020+

In 2050 around 70% of the world’s population will live in cities according to the UN [1]. How will urban mobility look like in the next decades? Which mobility products and business models will be successful?

  1. Deciding Factors: Convenience and Cost
  2. Urban Mobility Landscape: More Options become available
  3. Autonomous Driving: Key enabler for transportation revolution
  4. Single Use Case: Economics for autonomous work commute in the US = 29 Billion USD annually
  5. Placing Bets: ACES have high expected technical success and economic value

Overall the future of transportation holds the promise to become more accessible for everyone, safer and environmentally friendly. Let’s make it happen!

1. Deciding Factors: Convenience and Cost

Experience shows that successful products win customers — specifically in the mobility area — with ease-of-use and price. In the last century, the privately-owned car could become so important for our transportation system because it offers the highest flexibility for mid-range personal mobility at a competitive price. In the past, other options were either more expensive (e.g. cab) and/or less flexible and available (e.g. train).

2. Urban Mobility Landscape: More Options become available

The mobility landscape in the last century consisted basically out of three sectors with relatively clear business models (selling hardware or tickets) and vehicles:

  • Short-range: Walking, privately-owned bike
  • Mid-range: Cab, privately-owned car or motorbike, public transportation (bus or subway)
  • Long-range: Public transportation (bus or train), airplanes, ships

The new mobility landscape offers already and holds the promise to enable more modes of transportation in terms of vehicle types, use cases and underlying business models for each sector [8]:

  • Short-range: Shared e-scooter, shared bikes, e-bikes, etc.
  • Mid-range: Transportation Network Companies (e.g. Uber, Didi and Lyft) offering ride-hailing services, car-sharing, autonomous cars / trucks, peer-to-peer car-sharing, flying-cars, etc.
  • Long-range: Hyperloop, space travel, etc.

Urban mobility will be mostly affected by developments in the short- and mid-range sector. Some new offers may not work well in all conditions (e.g. scooters in colder or rainy weather) but in any case, this means for the privately-owned vehicle business model: More competition!

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[8]

3. Autonomous Driving: Key enabler for transportation revolution

Autonomous cars have a high potential to transform many aspects of urban mobility for example in terms of: City planning, freeing up parking spots, comfort, in-car user experience, passenger time usage, mobility access for everyone, availability, multi-modal mobility, efficiency for the environment, safety and business models.

Since the launch of Transportation Networking Companies (TNCs) such as Uber, Didi and Lyft we can experience a new transportation option which offers arguably a more convenient mode of mid-range personal mobility than cars in urban areas for households without kids (e.g. singles, couples, seniors, teenagers, etc.). On the upside, this mobility-on-demand offer comes in most urban areas with:

  • Parking
  • Chauffeur
  • High availability and short waiting times
  • Easy access
  • Less hassle about maintenance, insurances, etc.
  • Gives more time

On the downside, TNC offers are mostly cheaper than cabs, but still more expensive than owning a private car on a price per mile base. Additionally, TNC companies such as Uber or Lyft are not profitable (yet).

  • The service becomes more convenient for the user (e.g. higher availability, cheaper and better load balance)
  • TNCs will run a profitable business model

On the one hand, car-sharing options are a bit less convenient than ride-hailing services: Sometimes there are no cars closeby, users have to walk to the parked car, drive by themselves, park the car close to the destination, walk to the destination. But on the other hand, it’s mostly cheaper than TNC offers, even though 2019 was a rougher year for the service providers [10] it’s a profitable business model already in some cities [14] and could help to reduce the number of cars [20].

  • The service basically turns into an autonomous ride-hailing offer with all benefits
  • Car-sharing companies will run a profitable business model

In both cases (TNC and car-sharing) autonomous driving would have a high impact on the mobility landscape in urban areas. It could create a superior user experience for mid-range personal mobility and make existing business models (more) profitable. It could also enable new multi-modal offers and subscription-based mobility services.

“People tend to overestimate what can be done in one year and to underestimate what can be done in ten years” Bill Gates

4. Single Use Case: Economics for autonomous work commute in the US = 29 Billion USD annually

In the US people travel around 3.732.791 million miles each year considering all modes of transportation [3] (around 3.300.00 million miles = 88% in privately owned cars). Which of these trips will be the first ones to become a high potential market segment for autonomous TNCs?

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[4]

Non-stop (= non-dependent) work commutes for singles in privately-owned cars have a high likelihood: Each commute averages to around 11–12 miles (the distance has been stable throughout the last years [2]), the trips are likely around the same time, same route and same destination each day. This trip class accounts for around 192.845 million miles annually.

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[2], [4] and [9]

Mostly due to the rise of new mobility options in urban areas we can already see a drop of privately-owned car usage for all commutes of around 15% between 2001 and 2017 [2] [7].

With two assumptions it is possible to estimate the revenue potential for this trip class:

  • The potential costs of autonomous TNC services can match the costs per mile of a privately-owned vehicle by automating the driver (around 1 USD per mile [5] [6]).
  • Only 15% of singles switch for their non-stop work commute to a more convenient mode of transportation (which equals to around 4% of all commute miles driven in privately-owned cars).

This would lead to a revenue potential of around 29 Billion USD annually for a small likely fraction of a single-use case in the US. For comparison: Uber’s worldwide revenue of 2018 was 11,3 Billion USD [11].

5. Placing Bets: ACES have high expected technical success and economic value

It seems traditional car manufacturers treat the upcoming change driven by autonomous, connected, electric and shared (ACES) mobility offers the way they used to do it: Focus lies on hardware and software as part of the car which will be sold through the established distribution channels with known margin models. The electric drivetrain becomes an additional motor option and autonomous driving technology a premium ADAS feature for a surcharge. Even some new players try to enter the market this way: Byton [12], Rivian [13] and Tesla [17].

With a strong focus on the digital user experience, this has the potential to work. Even though the need for a privately-owned car decreases in some market segments, overall the number of yearly sold cars is expected to continuously increase due to the predicted macroeconomics (e.g. population and emerging markets growth) [15]. But the mobility landscape is changing more rapidly than in the last hundred years and transforming technologies such as autonomous driving have high expected technical success and economic value. OEMs might have to bet on autonomous shared mobility offers, to increase their chance of owning a significant part of the growing diversified mobility pie. It’s worth mentioning that mobility services provide recurring revenue streams and the profit potential per mile would be significantly larger than for privately-owned cars.

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2.750 million revenue in 2015 is plausible due to the average costs of 33k USD per car and around 80 million annual units [15], [18] and [19]

Let’s see how the future of urban mobility unfolds and which potentials will be unleashed!

Notes

Sources

[1] https://www.un.org/development/desa/en/news/population/2018-revision-of-world-urbanization-prospects.html

[2] https://www.bts.dot.gov/sites/bts.dot.gov/files/docs/browse-statistical-products-and-data/transportation-statistics-annual-reports/Preliminary-TSAR-Full-2018-a.pdf

[3] https://www.bts.gov/archive/publications/passenger_travel_2015/chapter2/table2_4

[4] https://www.bts.gov/archive/publications/passenger_travel_2015/chapter2/fig2_6

[5] https://newsroom.aaa.com/2018/08/ride-hailing-double-cost-car-ownership/

[6] https://www.caee.utexas.edu/prof/kockelman/public_html/TRB16SAEVs100mi.pdf

[7] https://qz.com/work/1723482/uber-subway-bus-walk-how-us-commutes-are-changing/

[8] https://www.cargroup.org/wp-content/uploads/2017/02/The-Impact-of-New-Mobility-Services-on-the-Automotive-Industry.pdf

[9] https://www.statista.com/statistics/242022/number-of-single-person-households-in-the-us/

[10] https://www.theverge.com/2019/12/18/21028517/sharenow-car2go-leaving-north-america-bmw-daimler-cities-date

[11] https://www.reuters.com/article/us-uber-results/uber-posts-50-billion-in-annual-bookings-as-profit-remains-elusive-ahead-of-ipo-idUSKCN1Q42CI

[12] https://www.byton.com/

[13] https://www.businessinsider.com/tesla-cybertruck-compare-against-rivian-r1t-amazon-ford-electric-truck-2019-11

[14] https://www.atkearney.de/automotive/article?/a/the-demystification-of-car-sharing

[15] https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/disruptive-trends-that-will-transform-the-auto-industry

[16] https://www.bts.gov/sites/bts.dot.gov/files/legacy/PTFF_Complete.pdf

[17] https://interestingengineering.com/tesla-becomes-the-biggest-us-automaker-in-history

[18] https://eu.usatoday.com/story/money/cars/2015/05/04/new-car-transaction-price-3-kbb-kelley-blue-book/26690191/

[19] http://www.oica.net/category/sales-statistics/

[20] http://innovativemobility.org/wp-content/uploads/2016/07/Impactsofcar2go_FiveCities_2016.pdf

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