Navigant Research Blog

How Will Wireless Connectivity, Vehicle Autonomy, and Electrification Converge with On-Demand Mobility?

— June 13, 2016

CarsharingIn the future, urban transportation is expected to be electric, autonomous, and on-demand. This is the vision that captures the major trends in mobility and is one that companies like Uber and Google already appear to be working toward. Navigant Research believes that on-demand shared transportation services—whether carsharing, ride-hailing, bikesharing, or even public transit—will converge with the major vehicle technology trends of electrification, wireless connectivity, and autonomous driving capability to create a low-carbon transportation system for cities over the next 25 years. Navigant Research has covered these trends in its recently published Transportation Outlook: 2025 to 2050 white paper and will discuss them further in a June 14 webinar, Changing Models for Urban Mobility.

Convergence Underway

This convergence is happening already. The first piece, wireless connectivity, is a key building block technology for a future where personal transportation transitions to mobility as a service. By 2025, Navigant Research forecasts that more than 1.2 billion vehicles globally are expected to be connected to their surroundings and/or to each other through either built-in or brought-in communications technology. At a baseline, these systems will provide real-time safety alerts and traffic notifications to drivers; the more mature and full-featured systems will support semi-autonomous driving systems. In this same timeframe, the number of vehicles equipped with some form of telematics will also grow rapidly. By 2025, most new vehicles in developed markets are likely to have telematics offering various types of services to the driver. Today, this type of connectivity is already central to electric vehicles (EVs), which have navigation systems that alert the driver to available charging stations and provide battery charge status updates.

The convergence is also already occurring between vehicle electrification and shared mobility. EVs are an increasingly popular option in carsharing schemes in cities. Indeed, city officials looking to control pollution in congested city centers are actively encouraging the use of EVs in carshare services. For example, officials in London pushed hard to bring to the city an electric carsharing scheme similar to the successful Autolib’ service in Paris; the new service opened in spring 2016. Carsharing services already see a greater percentage of EVs in their fleets than is found in the wider passenger car population. Navigant Research estimated that plug-in hybrids and battery EVs represented more than 15% of all vehicles in carshare services as of 2015. While these EVs are largely concentrated in a handful of services—such as the all-electric Autolib’, all-electric carshare companies in China, and in some of Daimler’s and BMW’s carshare services—EVs are expected to expand to many more carshare operations through 2025 and beyond. One reason for this is that carsharing will be a growing option for automakers to put certain types of cars into service—primarily fuel-efficient, electric-powered, and autonomous—and many OEMs are expected to operate these transportation services themselves as a way to offset reductions in revenue due to falling vehicle sales in urban areas.

Mobility as a Service

Carsharing is a key building block for the future of mobility as a service, and is now a well-established industry that feels familiar rather than new. But in fact, this business is at the early stages of major upheaval that will change the role it plays in urban mobility. First off, automakers are entering the market in earnest, and it is expected that almost all major automakers will be offering some type of shared vehicle service by 2025. A second disruptor is the rise of the one-way operational model. With drivers no longer required to return vehicles to the same parking spot where they picked it up, carsharing significantly expands its use case for city residents. Carsharing now can provide true on-demand mobility and be used for spur-of-the-moment travel needs and for shorter one-way trips than is typical for conventional round-trip carsharing. This new operational model makes carsharing more like the third major disruptor in the shared vehicle sector: the explosive popularity of ride-hailing apps like Uber and Lyft. While these two types of services can be seen as competing, they are better thought of as complementary, each offering a different type of experience for the customer. Carsharing acts as a replacement for owning a car, whereas ride-hailing is more directly a replacement for conventional taxi services. One-way carsharing and ride-hailing services may well compete for customers, but Navigant Research believes that the urban mobility model of the future will have both carsharing and ride-hailing.

Autonomous Opportunity

Both services probably will be early markets for autonomous driving technology, the final piece of this low-carbon mobility as a service model. It is likely that autonomous vehicles will initially be integrated into shared fleets in a controlled and regulated setting. Sites like central London, Paris, and Singapore are anticipated to be among the first. From 2025 on, a number of entities—including carsharing companies, taxi fleets, ride-hailing companies, and automakers—are expected to be operating autonomous fleets. In particular, automakers likely will embrace the autonomous fleet idea as an extension of their current involvement in carsharing schemes and will seek to incorporate them into their EV models. GM has announced it will begin offering autonomous Chevrolet Volts for its employees to drive at its Technical Center in Warren, Michigan in late 2016.

According to the United Nations, by 2050, as much as 66% of the world’s population is expected to live in urban areas, and the individually owned vehicle will probably become a rarity in most large cities. The possibility that shared mobility may lead to less use of public transit has been an oft-cited concern among city officials and sustainable transportation advocates. A 2016 report by the Shared-Use Mobility Center found that services like carsharing and ride-hailing are actually complementary to public transit. The report, which focused on users in seven U.S. cities, noted that the people that use shared modes of transportation the most were the most likely to use public transit and to own fewer cars. Navigant Research also believes that, from 2025 onward, public transportation itself will become more of an on-demand service, which will use buses much more efficiently. Connectivity and data analysis will enable the efficient dispatch of vehicles to where passengers need them, keeping idle time to a minimum. These services can be fully integrated with the other types of on-demand options in the city, making multi-modal travel more robust and seamless.

 

Fuel Cell Vehicles Join the Carsharing World

— May 19, 2016

CarsharingGerman hydrogen company Linde is experimenting with a solution to the infrastructure problem for fuel cell cars. This summer, the company will launch an all-fuel cell vehicle (FCV) carsharing service in Munich. For this trial program, Linde is partnering with Hyundai to provide the fleet of FCVs. The service, called BeeZero, will have 50 fuel cell-powered ix35 crossover SUVs (known as the Tucson in North America), Hyundai’s current entry into the fuel cell market and one of only two FCVs commercially available today.

Linde is in good company in offering a carsharing service with zero tailpipe emissions, as a number of carshare programs around the world specialize in battery electric vehicle (BEV) fleets. In its 2015 Carsharing Programs report, Navigant Research estimated that around 20% of all carsharing vehicles in use globally were plug-in electric vehicles (PEVs)—mostly pure BEVs. Most of these EVs are in a handful of programs where the EV is a part of the service’s brand identity. The most famous is probably Autolib’ in Paris, run by Bollore. The Kandi carshare service in China also uses a fleet of micro EVs. Both Daimler and BMW’s carsharing services have deployed the automakers’ EVs, but not exclusively. Daimler recently switched out all EVs for gas cars in its San Diego carsharing service; the reason given was a lack of charging stations. (It will be interesting to see if the cars are reinstated once utility San Diego Gas & Electric launches its EV charging pilot program.)

The Challenge of Charging

Charging is one of the challenges for battery-powered carsharing vehicles, and likely explains at least in part why few carsharing companies integrate BEVs into their larger fleet of gas cars. Even if chargers are available, there can be problems with ensuring they are properly plugged in and that the charge stays full.

FCVs operating in fixed areas have the advantage of requiring a relatively small number of strategically located refueling stations in a city while offering longer ranges than EVs. Navigant Research predicted the introduction of fuel cell carsharing services for this reason in our recent white paper on the future of transportation. This makes an easier pathway to market for FCVs than having to build a network of refueling stations to service private car ownership.

Longer Ranges

Linde is also promoting the advantages of the longer driving ranges offered by FCVs. The Hyundai ix35 has a range of over 350 miles on a tank of hydrogen. While this is indeed a key benefit of fuel cell cars, it will be useful to see how much of a benefit this is for a carshare user. Carsharing services have a few typical use cases: short inner-city trips (the kind being served by one-way carsharing operations); planned trips with slightly longer range needs; and long-distance trips, typically on weekends. The BeeZero service would presumably be used for the latter two cases, but long-distance travel might require use of a hydrogen fueling station at the destination.

Linde has said it will use BeeZero to gather information on “day-to-day fleet operations” of fuel cells and hydrogen that can be fed back into its hydrogen development efforts. BeeZero presumably also offers Hyundai not only with an avenue to deploy more of its fleet of fuel cell ix35s, which have seen limited uptake to date, but also a chance to take lessons learned into its FCV development efforts. In the long-term, it is possible to envision FCVs being deployed in carshare services sponsored by automakers and infrastructure providers in cities where only low carbon or even zero emission vehicles are permitted.

 

Ride-Hailing Is a New Tool in the City Planning Toolkit, but Can It Be Managed?

— April 6, 2016

CarsharingstandortWashington, D.C. underwent an accidental experiment in new mobility in March when the city’s subway system shut down for 24 hours for safety inspections. Usually the Metro only closes down in bad weather, but the D.C. system is in a rough state (a subject that could itself be the topic of a weekly series of blogs). Though service interruptions are now the norm with the Metro, shutting down the entire system for a day came as a shock and was only compounded by the short notice given to riders.

Riders had an array of alternatives, most of which are not new: private cars, buses, bikes, and telecommuting. But one thing the shutdown confirmed is that on-demand mobility services have to be seen now as an established modal option in a multi-modal city transportation plan. On-demand services reported significant increases in business on the Wednesday that the Metro shut down. Zipcar had a 50% increase in reservations compared to a typical Wednesday morning, and Lyft reported a 65% increase in ridership. Since carsharing has been around much longer than ride-hailing—and because setting up carshare services requires parking permission from the city—it is already integrated into many cities’ transportation planning. To some degree, working with public officials is built into the carsharing business model.

Flexibility Is Key

Ride-hailing businesses have grown astronomically in a short amount of time, and city officials and regulators have yet to catch up. In addition, ride-hailing’s DNA is that of a Silicon Valley startup that works outside the conventional government/industry nexus. This has fed these services’ rapid growth and helps make them dynamic and flexible. Indeed, Uber and Lyft responded to the shutdown in ways you’d expect from flexible, market-based transportation services. There was a surge in supply, with Uber saying it had 50% more drivers available for service during the morning rush hour than on a typical Wednesday morning. The expected spike in rates charged to riders was muted thanks to this increase.

This flexibility is something that city planning and transportation agencies should take into consideration when evaluating how to prepare cities for spikes in travel demand. Ride hailing will be an important new tool for cities in transportation planning. Of course, cities don’t control this tool, which leads to tension between city officials and the ride hailing companies.

Cities are also legitimately wary that ride-hailing simply shifts travel back to single-passenger vehicles, worsening traffic congestion. The D.C. Metro shutdown also illustrated how that might look, with reports of massive congestion outside Union Station due to taxis and pickup services. However, if ride-hailing affects traffic significantly, it will increase the cost of using the service for riders and make options like public transit and bikes more attractive. Carsharing will be affected by this as well, even though it’s less likely that carsharing could drive an exodus from transit. A hopeful sign of how increased demand may alter the ride hailing market: Uber reports that 1 in 4 customers used UberPool, the carpool version of its service, on the day of the Metro shutdown.

If ride-hailing is now a part of the city’s mobility landscape, it is not likely to remain outside the conventional regulatory system. In our upcoming Transportation Outlook: 2025 to 2050 report, Navigant Research predicts that ride-hailing will become a much more regulated industry over the next 10 years. This will make it less nimble and innovative but will help services grow by ensuring that companies act as good citizens in the cities where they operate.

 

Here’s How Electric Cars Will Not Cause the Next Oil Price Crash

— March 21, 2016

EV RefuelingLast month, Bloomberg Business published an article titled “Here’s How Electric Cars Will Cause the Next Oil Crisis.” The article outlined how declining battery costs will make electric vehicles (EVs) attractive alternatives to conventional petroleum powered vehicles, which will then lead to rapid market adoption. Consequently, EVs will then fuel the next oil crisis in the first half of the next decade. Historically, the word “crisis” when used in regard to energy commodities means resources are tight and prices are high; in this case, Bloomberg is using “crisis” to describe the opposite—a price crash on behalf of an oversupply of oil.

Semantics aside, Bloomberg’s analysis assumes that when EVs displace as much as 2 million barrels of oil per day (an amount equivalent to the oil glut that spurred the 2014 drop in oil prices), global oil markets will witness a similar price crash as has been witnessed since 2014. Navigant Research agrees with many of the assumptions Bloomberg uses in projecting EV sales; however, the overall premise of the article—that EVs will cause the next oil crisis—is sensationalist. It misses the bigger picture on energy and transportation, and likely works against Bloomberg’s own prediction.

It is true that EVs displace oil; Navigant Research estimates that the total amount of oil displaced by electric light duty vehicles in the United States from January 2011 through December 2014 was roughly 2.1 million barrels. However, focusing on EVs betrays a lack of comprehensive understanding on other trends in the automotive industry that are likely to be far more impactful to oil markets. These trends include improvements in conventional vehicle fuel efficiency, adoption of partially and fully autonomous drive systems, and the increasing growth of mobility programs as alternatives to vehicle ownership.

Missing Pieces

The biggest omission in Bloomberg’s article is conventional vehicle fuel efficiency. It’s not a particularly sexy conversation topic compared to electric drive vehicles; however, a small increase in the average conventional vehicle fuel economy has dramatic impacts on oil demand. Consider this: to accomplish the same 2.1 million barrel EV displacement Navigant Research estimated above, the U.S. conventional light duty vehicle fleet needs to improve fuel efficiency by roughly 0.08% in 4 years, which is nothing compared to regulated improvements that are already underway. Navigant Research estimates that U.S. Corporate Average Fuel Economy (CAFE) standards will increase average in-use gasoline powered light duty vehicle fuel efficiency 22% over the next 10 years. Eighty percent of global light duty vehicle markets are governed by increasing fuel efficiency regulations like CAFE standards; when considering the effects of these policies on a global scale, the oil displacement calculations belittle the oil displaced from EVs.

The only trend in the automotive industry that grabs more headlines than EVs is autonomous vehicles, or self-driving cars. The introduction of fully autonomous vehicles may not be too far off; however, adoption of vehicle connectivity and driver assistance systems that allow partial autonomous operation has been underway for quite some time and is penetrating broader vehicle markets at a much quicker pace than EVs. The impact of partially autonomous systems on oil displacement is difficult to measure at this point, but the theory is that if enough vehicles have these systems, there will be fewer accidents, which leads to less congestion on roadways, which in turn has the benefit of increasing the efficiency of all vehicles on the road, both autonomous and non-autonomous.

There’s also declining vehicle ownership to consider. Bloomberg partially acknowledges this trend in its article, claiming that the rise of ridesharing services may also contribute to greater EV adoption because energy cost savings rise in higher mileage use cases. However, if oil prices per barrel stay in the $40-$80 range for the next decade, gasoline-powered hybrids will likely win the energy cost equation over electric drive in most markets for this particular use case. The greater societal shift away from vehicle ownership is not necessarily as much a boon for EVs as it is a detriment to oil consumption. Greater use of alternatives—public transport, bikes, carshare, etc.—increases fuel efficiency per passenger mile traveled.

Misrepresentation

The Bloomberg article likely grabbed a great deal of attention by singling out EVs as the cause of the next oil crisis. However, publishing an article that misrepresents the potential impacts of EVs in the greater context of transportation and energy sector trends provides established oil interests a political target in a particularly active election year. With oil prices low and the return of the United States as a leading oil producer, the economic and geopolitical concerns tied to oil consumption are significantly lessened. Therefore, policymakers may be more amenable to reforms that negatively affect EV sales.

While Navigant Research agrees with many of the assumptions Bloomberg makes regarding battery prices and vehicle costs, these assumptions are largely contingent upon scale—and at this stage in the EV adoption curve, scale is a function of positive governing policy.

It’s unlikely that oil interests would be able to end federal EV purchase subsidies, but they have greater influence at lower levels. State and local governments are low-hanging fruit, and oil interests are likely to be effective at ending state subsidies and/or tacking on additional fees for EV owners who pay none or very few of the gas taxes that fund road upkeep. While the Bloomberg article is not igniting oil industry concerns regarding EVs, it adds fuel to their interests. This may be good for Bloomberg, but not so much for EVs, and therefore not so much for the “crisis” prediction.

 

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