Stanford economist Tony Seba and tech investor James Arbib just released a co-authored study which made the following claims:
- Private car ownership will drop 80% by 2030 in the US.
- The number of passenger vehicles on American roads will go from 247 million in 2020 to 44 million in 2030.
- Using electric ridesharing will be 4 to 10 times cheaper per mile than buying a new car by 2021 (and each family could save up to $5,600 per year, compared to purchasing and maintaining a traditional vehicle).
Those are compelling numbers, but I’m not buying them. I think the underlying model of human behaviour and transportation is too simplistic. To be clear, I think that this future or something close to it will transpire, just not in in the 13 years they project.
Let’s tear this apart a bit.
Economics of Car Ownership
Part of what is interesting to me is that I’m already in their future. I spend less than $2,000 on vehicles annually through UberX, carsharing programs like Car2Go, the occasional traditionally rented car, and bikesharing programs. Outside of fun cars on twisty windy roads, I prefer to let other people drive while I do something else.
This has been a completely viable lifestyle choice for many years in most major cities around the world, yet car ownership has continually increased by an average of 4% per year. I dug into this when researching my own, differently simplistic model of electric car penetration and its impact on oil consumption in 2016.
I looked at the trends, and I didn’t see global impacts, but only local impacts on car ownership. In certain cities — such as San Francisco, Vancouver, and Toronto — the ownership trend was flatter, but not flat, but globally growth was chugging along at 4% per year and had been for decades.
Uber and Lyft existed when I did this study and had existed in many cities for years. Taxis exist everywhere, and in many cities, such as Singapore, they are as cheap as UberX already. Transit exists in cities globally, and there are many cities which have had huge cycling cultures for decades. Yet car ownership continued to climb.
The argument for cycling to work, saving $6,000 per year, and gaining lots of side benefits has been touted for decades. Yet people persisted in buying cars.
Singapore is a useful place to study irrational car ownership behaviour. It’s had explicitly car-unfriendly policies for years. Its Certificate of Entitlement auctions, which give people the privilege of driving a car for a decade, vary from a low of about $36,000 USD right now to a high of $72,000 USD. 1.6 litre four-cylinder economy sedans cost around $115,000 USD. Congestion charges are tolled for everyone entering the central business district. Transit is ubiquitous, clean, and cheap, with the national target being that 80% of the populace of the country live within 400 meters of a subway stop. Taxis are widely available, clean, and very cheap — about 40% the price of taxis in Toronto, which makes them cheaper than UberX.
The narrow economic view of car ownership suggests the trap of the rational consumer fallacy that has plagued economics for a long time. That fallacy suggests that people make decisions that are fact-based and logical, presumably the same way that people in the USA voted in 2016. People already choose to spend extraordinary amounts of their personal income on vehicles which are much more expensive than any rational decision can justify, both in initial outlay and long-term operational costs. If decisions about cars were rational, there would be a lot more tiny econoboxes on the road and a lot fewer SUVs.
[Editor’s Note: As the former director of a nonprofit focused on promoting bicycling, transit, walking, and smart growth in very progressive a region, I fully agree with the point Mike Barnard is making here. Additionally, with my undergraduate training in sociology, I’m happy to see Mike highlight the “rational consumer fallacy,” which is a critical matter often ignored in discussions about the future of car ownership. Indeed, it was these reasons and experiences that let me to become a huge electric car advocate.]
People Are Attached To Private Cars
Cars aren’t just A-B transportation for most people. They are extended backpacks, lifestyle aspirations, decompression zones, status signifiers, vacation vehicles, and fashion accessories. None of those values that people place on cars are actually rational, but they are incredibly strong.
Put up your hand if you know this story: A person is deciding to buy a new vehicle. Once a year, they tow a 20-foot boat to a lake in the mountains to go fishing. The rest of the year, they drive an average of 15 miles a day on congested urban streets. The rational decision is to buy a tiny commuter car that’s easy to get around in cities and rent a truck for those two weeks a year when they need one. But they buy a truck that can tow their boat as their primary vehicle instead.
People don’t buy vehicles for their daily average use, but much more so for their annual extreme use and what it says about who they are.
I know a couple who spend $22,000 USD annually on their two cars. They live in Vancouver in the catchment area for Car2Go. They could bike, walk, and take transit. They could take taxis everywhere and save money and live more conveniently. But they don’t.
People will persist in having private cars rather than having to wait for an autonomous vehicle. They are vehicles whose sunk costs are turned into travel conveniences, with weekend trips to go skiing and annual road trips south made economical by having a car for commuting. People will still want to throw their gym clothes or baseball equipment in the trunk and leave it there while they work.
Autonomous Cars Aren’t Going To Reduce Congestion
There’s a theory which has little empirical support. It goes like this: when every car is autonomous, road congestion will drop a lot. But my assessment of the research in this area last year made it clear that the opposite was more likely. There will be a lot more road miles driven. Without careful urban densification strategies, sprawl will increase. While highway throughput will likely increase, urban street and intersections will slow substantially.
The table to the right is one I put together to outline the possible impacts on various types of things which cause congestion. Autonomous cars don’t solve physics, weather, road work, and the like. But they do increase the number of vehicle miles driven for any given trip because they always drive from wherever they are to where the passenger is, pick them up, drop them off, and then drive away. More road miles is directly correlated to congestion, especially off of highways.
[Editor’s Note: I think there’s another critical factor here. People are more willing to put up with congestion if they can do something in the meantime. If they are the one who has to be driving, this makes them less tolerant of congestion. If they are working, watching a movie, resting, etc., they are more tolerant of congestion and a longer commute.]
What’s Being Disrupted Is Transit & Taxis
Seba’s model assumes that personal car ownership is what will be disrupted. That’s a common mistake, and to be clear, there will be a growing subset of people who choose to be car free. But what’s actually appearing to happen is that people are choosing UberX and Lyft over buses, trains, taxis, and bicycling. The major trend is a hollowing out of low-congestion ridership as carsharing options get cheap enough to attract people who can’t afford a car and need or want the convenience of saving time. [Editor’s Note: Or, like in my case, this is what happens for people who prefer a rational and high-quality car-free life but then occasionally find the convenience of an Uber beats catching a tram, particularly when I’m in a rush.]
San Francisco is ground zero for this. Bus ridership has plummeted, anecdotally, so they are now doing empirical studies to figure out what the correlation and causation are. But taxi companies are up in arms globally over Uber because it is directly killing their more expensive business model. There’s nothing anecdotal about the impact on that business.
Imagine if you could get in a cheap, autonomous electric car instead of the commuter train and it would drop you off at your office instead of a three- to five-block walk. Imagine if you already drove a nice car, parked it in your building and always had it conveniently handy for errands and leisure tasks. Which group is going to be displaced?
Personally, I understand clearly the impact of transactional costing of transportation. Whenever I’ve owned a car, I’ve considered the entire annual cost to be sunk, and used it much more than I use carsharing programs now, where the transactional cost, low as it is, stares me in the face in the moment of the trip.
So, What Does All This Mean?
Well, I think there will be fewer people with cars in their driveways and car parks (parking lots), but not that many. I live in just about the best place in Canada to not own a car and also likely the worst place in Canada to own a car. The last two buildings I have lived in I rented out my parking spot to people who just couldn’t live without one.
Will ownership be disrupted? Not really. Will everyone who owns a car let it run around autonomously picking up other passengers while they are at work? No.
Will car companies still be selling a lot of cars to individuals? Yes, but they will be different companies. I wouldn’t be surprised if several of the current big players wither away over the next 15–20 years, as they are so far behind on autonomy, electrification, and a raft of other innovations that Tesla and companies like China’s BYD are bringing to market.
Status is shifting. The bloom is off of the BMW, Audi, and Mercedes roses in many parts of the world, with Tesla taking the forefront. New electric manufacturers’ concept cars are met with delight, while traditional manufacturers are met with yawns and demands for real cars, not concepts.
But that isn’t changing the fundamentals. Cars are status signifiers, backpacks, conveniences, transportation, sports vehicles, vacation vehicles, and fashion accessories. There’s a lot more wrapped up in vehicle ownership than rational economic decision making.
This isn’t the first time that people from Silicon Valley ignored the inertia of the physical world and human nature. Their attempts to disrupt electrical generation in the midst of an existing decades-long disruption by wind and solar that they were unable to see were equally challenged by the vast scale of the built infrastructure and the basic utility it offered. Silicon Valley gets it right when it aligns with and exploits human nature, not when it ignores it.
What is changing for the positive is that in a few years, the percentage of fully electric vehicles on the road will be much higher. And the percentage of cars which avoid accidents and pedestrians by themselves regardless of driver inputs will be much higher. The world is going to be a better place. But it will be a better place with a lot of people in their privately owned cars on the roads for a lot longer than Seba and Arbib project.