Transport Investment under Uncertainty
15 December 2017 | Author: David Fowler, Transport and Technology Journalist  

The world is on the cusp of a transport and societal revolution which, over the next 10 to 15 years, "will drive change on the scale of the Industrial Revolution".

So said KPMG global head of public transport and UK head of infrastructure Richard Threlfall, introducing the second Transport Knowledge Hub national workshop this week, entitled Transport Investment under Uncertainty. The event addressed the question of how to approach transport investment at a time when disruptive technology was likely to have a profound effect on travel patterns, and the wrong decision could lead to millions being wasted on assets that became worthless or "stranded" midway through their life.

Mr Threlfall believed the issue was even more fundamental.

"Do we just let the market get on with it and see what society we get as a result? Or is it a fantastic opportunity to involve policymakers to gently nudge the way this technology plays into our lives, so that we get a better society out of it?"

Policy implications

Charlie Simpson, head of KPMG's global mobility 2030 business, said three distinct but complementary disruptive forces were coming together: electric vehicles, autonomous vehicles and mobility as a service. "Each of these is a significant trend in its own right, but when you layer them together, they are truly transformative," he said.

He added: "It's easy to imagine a utopian outcome, but dystopia is just as likely," as the continuing controversy between Tfl and Uber in London had shown.

Edwin Kemp, an associate partner in KPMG's global strategy group, outlined expected trends in mobility as autonomous vehicles and mobility as a service (MaaS) became widely adopted.

KPMG's 2017 Global Auto Executive Survey identified that industry executives believed that up to 50% of current car owners would no longer own a car by 2025 as new mobility services were introduced. Passenger miles travelled would increase by 10%, while the cost per mile could decrease by up to 40%. Because cars will be "shared" rather than owned, the miles covered by each vehicle will increase by a factor of five. And the number of companies participating in the sector will decline as consolidation take place.

Mr Simpson said the pace of adoption of AV-MaaS could be expected to be comparable with other disruptive technologies. "We are expecting it to mirror the uptake of smartphones and e-commerce," he said.

Commercial considerations

Simon Craven, a special adviser to the Go-Ahead group, considered the future of mobility from a commercial perspective, and asked how investors could make money out of it.

Investment is a word often used loosely, said Mr Craven, but in its true sense investors accept a risk with the incentive of a return on their capital. Without a reasonable prospect of bringing in a return, the activity is not investment but speculation, or gambling, and a business based on it will sooner or later fail.

Mobility industries are massive investors in long-lived assets which need to generate a return over their lifetime, he said. "When we invest shareholder money or public funds in an asset, we're failing in our duty if we don't manage the risk of it being stranded – becoming economically unviable," he said. "So we need to manage our business and our stakeholder relationships so that the commercial use of these assets is likely to be defensible for their economic lifespans."

He added: "Some people don't really talk about the extent to which new types of MaaS are only being proved to work with big subsidies – from the taxpayer, from investors, or in some cases from gig-economy workers."

Governance

Prof Greg Marsden of the Institute for Transport Studies at the University of Leeds looked at the question of governance.

In planning for the future, he said, "there is lots of uncertainty even if the world carries on as it is – but it won't."

He set out three important contentions. First, smarter mobility is coming. Second, no amount of smart technology or big data will overcome the need for good policy, planning and governance. Third, there is a need to plan actively to try to bring about socially desirable outcomes from smart mobility.

Conventional thinking in transport policy assumes smart mobility will be more efficient, but this is not guaranteed, he warned. Passengers in autonomous pods will be a captive audience, giving the operator "control over their time and choices". There is a risk of a monopoly or oligopoly being created, which would use its power to exact higher charges.

Discussion

Mr Craven said local authorities should be thinking now about how to integrate mobility services with social objectives.

From the floor TfL's David Christie pointed out the difficulty of planning when technology in some forms, such as e-commerce, reduced the need to travel (for shopping). Prof Marsden said that in general MaaS was expected to encourage more travel because it would reduce the cost per mile.

There was a suggestion that the new forms of mobility could be managed better at city-region level, for example, than nationally, because at that level it would be easier to align objectives between transport and areas such as health.

Chris Mills of TfL suggested that widespread adoption of AVs could be at odds with the London mayor's objective of increasing walking and cycling. Mr Craven stressed the need for an integrated transport system and argued that TfL was in a position to regulate autonomous taxis in such a way as to fit in with other objectives – an approach taken by Copenhagen.

A more detailed write-up of the Transport Knowledge Hub national workshop is available here. Visit our YouTube page for long and short video summaries of the event.

The Transport Knowledge Hub acts as a forum for LEPs, local and central government, and the transport community to ensure transport infrastructure drives inclusive and sustainable economic growth. For future TKH seminars and updates please follow TKH on Twitter and LinkedIn, or join the LinkedIn group. You can also sign up for weekly round-ups of all the latest transport news and a monthly update from the Transport Knowledge Hub.

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