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What Does the Future of Mobility Look Like?

The TV cartoon series "The Jetsons" gave us an insight into the transportation of the future. Flying cars darting across the skyline seemed unrealistic but this reality is approaching at an ever-increasing velocity.  Elon Musk is my mobility mentor. Not only were we born in the same country, but his dreams are wild and exaggerated. He has done more to move transportation forward in the last twenty years than any human on the planet.

He taught us that electric cars, charged by the energy generated from the tiles on our roof, can be sexy and fast. His Boring Company is looking at developing the Hyperloop that could further revolutionize passenger and freight transportation. In his spare time, he is working towards the democratization of space travel through Space-X. If he has his way, we could see strip malls and McDonald's on Mars sooner than we think.

I am fascinated by urban mobility. It is the lifeblood of a city. Trains carry people to and from work. Trucks deliver goods and collect refuse. Cyclists zip in and out of traffic. Pedestrians cross busy streets listening to music and chasing Pokémon. Women fly along the avenues while simultaneously applying mascara, slapping the kids in the back seats and talking to their life coaches on the phone.

I lived in Mexico City for fifteen years. It is built on a lake, surrounded by two volcanoes, one of which is active. It is the central point of a country that lies within two seismically active earthquake zones. The Baja California peninsula lies near the boundary of the Pacific Plate and the North American Plate, while southern Mexico lies just north of the boundary between the North American Plate and the Cocos and Rivera tectonic plates.  It has been rocked by 61 earthquakes above 7.0 on the Richter scales since 1776 (a few months before the signing of the United States Declaration of Independence). 

The population of Mexico City is estimated at 21 million which makes it the second-largest metropolitan area in the western hemisphere after New York. Add to this a collapsing infrastructure, poor air quality, interference from pedestrians, the presence of a wide range of vehicle types and the inherent disregard for traffic regulations (traffic lights are only a suggestion), and it is like watching a Dr. Seuss movie on hallucinogenic drugs.

When I first arrived in Mexico City, you could have spotted me from a mile away. I was the only person who stopped at the red traffic light, used turn signals, traveled the speed limit and yielded to oncoming cars. By the time I left, a NASCAR racer would have been terrified to get into the car with me. Not only did 15 years of Mexico City traffic reduce my expected lifespan by 15 years, but it had turned me into a psychopathic driver.

Mobility goes to the very heart of the quality of life. The average commute in Mexico City is 3.5 hours which is brutal. The great news, however, is that mobility is on the cusp of dramatic change.

In a report issued by McKinsey in collaboration with Bloomberg New Energy Finance, entitled "An Integrated Perspective on the Future of Urban Mobility", they identify key trends in mobility.

Six Key Mobility Trends

Trend 1: Clean and Minty Fresh

In terms of urban passengers, the concentration of people in urban centers and the creation of megacities is increasing the demand for public transportation. The majority of the city buses and coaches are diesel-driven. I travel regularly to Bogota in Colombia where I am continuously amazed by the filth that comes out of their buses. Breathing these fumes is more dangerous than lying flat on your back plugged into a government hospital respirator being attended to by Carlos the Jackal.  A clear effort is being made towards battery-electric buses (BEB) and buses with alternate fuel (hybrid buses) but as in most big cities, change is slow. The biggest barrier is the upfront cost of BEB which typically costs twice as much as diesel-powered buses. Alternatively, the introduction of hybrid buses, either diesel-electric, CNG (converted from diesel), or biofuel-powered, would be much easier as they are not as costly as BEB. Presently, BEBs and hybrid buses are operating mostly in the U.S., Europe, and China. Brazil and India also have started with electric and hybrid public transport. Even though the global bus market is dominated by diesel-powered buses, the demand for BEBs is projected to grow at the fastest rate in the coming years.

Trend 2: Smart, Cunning, and Autonomous

In heaven, all chefs will be French, all policemen will be British and all drivers will not be Italian. I recall walking along a quiet Roman road a few blocks down from St Peters. A Fiat Cinquecento came flying past. There was the sudden screech of brakes and the noise of metal hubcaps on concrete. The gears meshed into reverse as the car backed up and then proceeded to maneuver into a parking space the size of an Ikea chest of drawers (pre-assembly). In a feat that would have made Houdini proud, the Roman driver was able to engineer his two-seater into the parking spot but not before leaving sizeable dents in the fender of the Skoda parked in front and the Ford Fiesta parked behind. He stormed out of the car and proceeded to add another dent into the door of the Skoda with his Ferragamo adorned foot.

If you want to make tons of cash, open a panel beating/body shop business in Rome.  When people say that autonomous driving is pie in the sky, I think back on this story. Even malfunctioning robots could drive better than the Romans.

Long haul trucks are pioneering the move to autonomous driving. A few years back, autonomous trucks and buses were not projected to be commercialized before 2025. Some studies also predicted that they would not be commercialized before 2030.

Shortages of drivers, high wages, and accidents during long-haul journeys are a few factors that are accelerating the developments in autonomous drive commercial vehicles. This is going to put a dent into the business of roadside hookers – they would be well advised to bone up on their Python (the programming language and not the male anatomy) skills.

Ride-hailing player Uber (Otto), Alphabet (Waymo), and few OEMs, such as Peterbilt Trucks and Embark, are working towards autonomous truck technologies. Navya Company, Navy Arma & AAA, Easy Mile, SB Drive, and Auro are the companies focusing on autonomous bus shuttle service. The Singapore government has announced that it is planning to introduce driverless buses on the road from 2022. Nanyang Technological University (Singapore) is already using driverless shuttles at its campus. Pot-smoking students are more dispensable than the general public.

If you are an Oliver Stone fan, this trip into the world of truck platooning is going to be pleasurable. An army platoon is made up of a platoon leader and his soldiers. Truck platooning connects the leader to his soldiers employing artificial intelligence and autonomous driving technologies.

These technologies will drive the support systems such as adaptive cruise control for speed and lane keep assist for positioning on the road. As in a military operation in the Vietnam jungle, the formation is wrapped tighter than an airport sandwich. The trucks behind take their cue from the leader who is at the front of the formation. These vehicles adapt and learn from the leader with little or no human interaction. This enables longer distances to be covered and addresses the health and safety issues associated with driver fatigue.

Trend 3: Sharing is Caring

Ride-hailing services have taken off as tree-hugging millennials look for ways to reduce the number of gas belching cars on the road. As at the end of 2019, Uber and Lyft boasted combined market capitalizations of almost $65 billion. The estimated valuation of Didi was $55 billion which takes the combined size of these three players to $120 billion. This is before the coronavirus got hold of them in 2020. Ride-hailing, however, is only part of the picture.

One also needs to look at operator car sharing. Zipcar offers a fleet of cars with fixed parking spots that can be rented by the hour. Car2Go offers a floating fleet of cars that can be located on an app and rented for one-way trips within defined city centers.

There is also peer-to-peer car sharing which is looking to disrupt the car rental business. EasyCar Club is a peer-to-peer marketplace that matches car owners with renters on an hourly basis. FlightCar allows car owners to rent out their vehicles from airport parking. How cool is that? To pay for airport parking, you need to max out your credit card and take out a second mortgage on your house. Now you can save on parking and generate some income in the process. It is like winning the lottery and discovering a cure for cancer.

Finally, there is a peer-to-peer ride sharing. Bla Car matches drivers with passengers for intercity drives. Scoop is an app-based matching of pre-booked commutes with people working in the same area. The next time you are stuck in traffic and you are tempted to rip your brain out of your skull through your eye sockets, take the time to count the number of vehicles containing only one human. I would be surprised if the percentage was below 80. Pooling and sharing is the ticket to reducing the number of cars on the road, getting that traffic flowing and healing the planet.

Trend 4: Connectivity – Opiate of the Masses

Fear is a powerful motivator. Fifty years ago, top of the list of human fears were large fury spiders, fat slippery snakes, and communism. Today, it is connectivity. When a human is separated from their phone for longer than it takes to draw money from a cash machine, there are clear symptoms. According to WebMD, these symptoms are "racing" heart, feeling weak, faint, or dizzy, tingling or numbness in the hands and fingers, sense of terror, or impending doom or death, feeling sweaty or having chills, chest pains, breathing difficulties, feeling a loss of control and illusions of being chased by Keith Richards and a human-size hypodermic needle.

The Internet of Things is defined by three characteristics: the presence of sensors, connectivity of networks, and the ability to rapidly compute incoming data. These applications are swiftly moving into mobility.  Auto connectivity goes beyond driverless cars.

Firstly there is telematics which is a highly intelligent computer in your vehicle that can report on nearly every detail – from speed and acceleration to tire pressure. Insurance companies are using this to more accurately calculate premiums on policies. If you plan to dedicate your evenings to illegal street racing, you will need to find out how to override the telematics to avoid a spike in your insurance premium.

Secondly, there is vehicle-to-vehicle connectivity. This allows vehicles to talk to one another – similar to what we saw with truck platooning. They can talk about their most recent oil change, break the loneliness of being hours on the road or set up support groups to vent on abusive masters. Of lesser importance, they can communicate on traffic conditions, congestion zones and weather issues.

Trend 5: Gloom and Doom for Carmakers

The automotive sector is being battered by winds of change that are quickly approaching gale force.  The outlook for carmakers is more challenging than pulling an ox wagon over the Swiss Alps armed only with a Swiss Army knife and a pair of flip flops. 

Automakers are bracing themselves for a day in which their primary business model of selling cars to customers becomes obsolete.  Automakers are being attacked from all sides.

On the one hand, there is the move towards electric cars. Consumers are demanding electric vehicles at an affordable price. This is pressurizing profit margins. Consumers are also demanding more technology such as partially and fully automated driving. The research and development spend for automakers is massive and they are having to extend their investment horizons to make the return on investment palatable to shareholders.

This comes at a time when automotive sales are declining faster than a Korean midsize down a mine shaft. In 2017, Bloomberg data showed a total of 85 million cars were sold. In 2018 this number slipped to 81 million and there is every indication that the number for 2019 will be below 80 million for the first time since 2014.

Behind this declining trend are shared mobility services such as Uber and Lyft. Shared mobility networks are an ideal platform on which to deploy new technologies. The next generation of services will be electric and autonomous. As shared mobility services grow, their impact on other modes of transportation will have important ramifications for consumers, automakers, and policymakers. You can expect a major automaker to go tits up in the next decade.

Young and old alike are reconsidering the wisdom of buying cars. Prudent families are buying one SUV to cart around the kids while dad "ubers" to and from work. Millennials and generations Zs do not want to be tied down by car ownership and are starting to recognize cars as liabilities as opposed to assets. People are beginning to understand the total cost of car ownership. When one factors in finance, maintenance, insurance, parking, fines, taxes, fuel and the stress of having to share your lane with millions of psychopaths, it may work out cheaper to ride-hail.

In December 2019, I conducted a mobility experiment. In the interest of highlighting the plight of that delicious holiday fowl, I went cold turkey. I parked my car in the garage and committed to only use public transportation.  These were the rules of the experiment – Monday to Friday in the commute to and from work, in addition to any business of social meetings from 6 am to 8 pm, I was only allowed to use publically available transport. For Mexico City, that includes the following: metro, buses, bike shares, electric scooters,  and public rideshares like Uber/Didi/Cabify. I was unable to mooch off friends or colleagues.

Let me explain the results with reference to the greatest show on television that explains all the mysteries of life – Seinfeld. Allow me to set the scene. Kramer uses briefs because his "boys need a house" until he discovers that he has a low sperm count. He then switches to boxers but finds that there is "nothing holding" him "in place" and he is "flipping and flopping". In the next scene, Kramer walks back into Jerry's apartment, and this is the exchange:

JERRY: Well it looks like you've adjusted to the boxers.

KRAMER: Wellll, I wouldn't go as far as that.

JERRY: You went back to the Jockeys?

KRAMER: Wrong again. JERRY: Oh, no.

JERRY: Don't you see what's goin' on here??? .. No boxers, no Jockeys...

JERRY: The only thing between him and us is a thin layer of gabardine...

JERRY: Kramer, say it isn't so.

KRAMER: Oh, it be so. I'm out there, Jerry, an' I'm lllovin' every minute of it!!!

JERRY: Don't you need a little... help?

KRAMER: Surprisingly, no. I'm freee, I'm unfettered... I'm like a naked innocent boy rrroamin' the countryside!!

That is how I felt during those three weeks. Free and unfettered. There was no need to worry about psychotic drivers cutting into my lane, no need to stress about parking and most importantly, I could focus on important business of the day – such as improving my Tetris score.

Owning a car is a drag, especially in the big cities. A businessman walks into a New York bank and asks for a loan for $10,000. The banker asked him what he can offer in guarantee. The man said he had a brand new Rolls Royce parked in the street. The banker agreed to accept the car into his parking lot until the loan was repaid.

One month later, the same businessman walks into the bank and asks to repay the loan. The banker takes out his HP 12C calculator and calculates interest at $80 (one of the benefits of a low-interest-rate environment). The banker then comments that after the man had left the branch, he did a background check and found that he was a billionaire. Why was it necessary to borrow the ten grand? The man replies - where in New York can you find parking for a month for $80? Owning a car is expensive unless you are a creative billionaire.

The growth trajectory of rideshare companies has been astronomical by every metric except profitability.  The biggest factor dragging down the profitability of Uber and Lyft is that approximately 25 percent of the fare needs to be paid to the human driver. Autonomous driving, the delivery of which will be accelerated with the advent of 5G, could be the inflection point for these ride-sharing companies.

Uber has created a unit, Advanced Technologies Group (ATG), tasked with developing self-driving capabilities. Autonomous vehicles are critical to ridesharing profitability as customer adoption increases. Do not expect these companies to turn a profit before autonomous driving is widely adopted, but once that happens, these companies are heading into the stratosphere. Trading in these stocks is going to generate enough adrenaline to fuel a family-sized Hyundai over the Himalayas.

The typical taxi ride today costs $2 to $3 per mile. A robo-taxi would cost around 70 cents per mile, according to UBS Group AG's investment bank. Elon Musk from Tesla says that he could lower that to 18 cents (let's make that 30 cents because Elon has been known to err on the bullish side).

Musk believes this can be achieved by convincing Tesla owners to moonlight their autonomous cars as robo-taxis when they are not using them. Imagine that, let your car out for the night with a 6 am curfew and instead of costing you money, you could make a couple of hundred bucks. If you had told that to Henry Ford a hundred years ago, he would have called the men in the white suits and straitjacket to come and take you away.  

Shared, driverless electric cars will mean less pollution, traffic, and crowding because cities will no longer need to find a place to park cars that are left sitting idle for an estimated 94 percent of the time. If you are a Tesla owner in New York, your car will not only be an income-generating asset, but you will also save close to a thousand bucks a month on parking. For the first time in the history of humanity, it will be possible to turn your car from a blood-sucking vampire into an income-generating asset.  

Trend 6: Electric Vehicle Adoption

The number of electric vehicles on the road is rising quicker than Rapunzel's dash to the phone during a Hair-in-a-Spray infomercial.  But EVs still only account for a small portion of total vehicle sales. Two factors are likely to change this in the coming years. Firstly, tightening fuel economy regulations in the U.S., Europe, and China. Automakers are responding by launching more electric options for their customers. Secondly, falling lithium-ion battery prices. Batteries are the single most expensive component in the EV and average prices per kWh fell 85 percent from 2010 to 2018. The current trajectory puts EVs on pace to be fully cost-competitive starting in the mid-2020s according to Bloomberg New Energy Finance.

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