Sometimes it might be best if writers covering the transportation scene in America didn’t live in New York City. Or maybe they should just get out more; they need to see how the entire rest of the country lives and works, and what demands everyone else makes regarding their personal mobility. Benjamin Schneider at CityLab falls into that category because on June 21 his column predicted that “little vehicles will conquer our cities.” Like grief, Schneider suggested, “The arrival of dockless bikes and electric scooters in U.S. cities can be tracked in stages.”
In the first stage, annoyance, everyone is furious about sharing the crowded sidewalks with these so-called early adopters on rent-by-the-minute bikes and scooters, as if bikes and scooters haven’t been on the scene for the past 130 years. Schneider claims the second stage is one’s epiphany; out of curiosity, we try these vehicles ourselves and become so enamored with them immediately that stage three, the obvious conclusion, is mass adoption of these small electric vehicles to get around. Basically, when others are running into you with these vehicles it’s a problem. When you run into others it’s pretty cool.
His conclusion is simple: “Often cheaper, faster, and more fun than a car, Little Vehicles could provide the critical mass that finally drives the automobile to its knees in America’s big cities.” One wonders whether CityLab has its employees drug tested.
Not good for cities
Just the day before, Wired magazine had carried a story titled, “Autonomous Vehicles Might Drive Cities to Financial Ruin.” It discussed the Ann Arbor, Mich., Mobility Meeting of the Minds, which looked at self-driving cars in the day when no one owns vehicles anyone and everyone simply pays for mobility on demand. Cities stand to lose major budget elements: No more revenues off tickets, as these cars won’t speed, park over the meter time, or run red lights. Cities could potentially lose their share of gasoline taxes, registration fees, and billions in parking revenue. After all, self-driving cars will never hunt for a parking space; they’ll simply drop you off and go to their next fare.
Oh, and because cities often use those revenues to fund public mass transit, it will suffer, too; to prove that point, they say public transit ridership in the San Francisco Bay area has dropped since Uber and Lyft arrived. Joining in the fun was Andreas Mai, VP of market development at Keolis, who claimed that the Bordeaux (France) transit authority charges citizens a flat fee of $50 a month for “unlimited access to all forms of transit”, including trams, trains, buses, bikes and ferries.
Spoiler alert: Object Lesson Ahead
Two days later and 366 miles north of Bordeaux, Paris canceled its contract for car sharing in that city. That’s right, the shared bikes situation that is flooding the streets of America right now kind of had its start in Paris back in 2007. And the first major car-sharing system, Autolib, came just four years later. Now, after nearly eight years in service, the owner of Autolib forecast around $350 million in losses over the next five years and wanted the good people of Paris to foot that bill.
Remember, this city has moved to ban old polluting vehicles from its central district, is fine with getting rid of gasoline- and diesel-powered cars in a couple of decades, and pays mothers decent money to stay home with their newborns for the baby’s first four months of life. But when it comes to covering the losses of one of the largest car-sharing operations in Europe, Parisians will pass on that financial honor. (The city also walked on its bicycle sharing program contract with Velib, but only because another vendor promised more options and electric bikes.)
But it was the high cost of infrastructure for those shared cars — and forcing electric car users to drop these rent-by-the-hour vehicles at charging locations in Paris — that doomed the operations to perpetual losses. That should really be an object lesson for everyone considering this concept going forward.
Last week General Motors president Dan Ammann passed some of his corporate responsibilities off to product head Mark Ruess. The GM statement said that Ammann would remain GM president but spend more of his time in San Francisco, so he can be closer to partner Cruise as that company develops self-driving vehicles. Of course, if you had the choice of living in Detroit or San Francisco and made that kind of money, that would seem to be a no-brainer. But truly self-driving cars aren’t here, aren’t even close to being here, and General Motors sold 10 million vehicles worldwide in 2017. One would think the bigger and far more critical job is in Detroit, being the president of GM.
Oh, well; Ford just bought a 104-year-old train station in Detroit to expand its manufacturing footprint. Ford’s CEO is suggesting that he’s the perfect interior decorator to oversee its refurbishing; maybe Ford’s remodeling of a dilapidated train station can become a weekly show on HGTV.
As for the future, General Motors already has a car-sharing company called Maven — not in every city, as it’s being tested and launched. Come to think of it, Digital Trends’ Stephen Edelstein wrote about using that service the week before all the rest of these articles came out. Edelstein picked up a Chevy Cruze from Maven in Manhattan for a few days of driving up in Connecticut. He said one day cost him $130, slightly less than Zipcar charges for its Honda Civic. Renters are allowed up to 142 miles per day; they pay 42 cents per mile after that.
He pointed out that the Chevy he ordered had slight cosmetic damage, and overall at delivery felt like a rental car experience. There’s a reason for that, too: It is a rental car experience, and not an inexpensive one at that. While overall his article was fair, balanced, and not too critical, he too suggests that car sharing is not the automotive future, although it is here to stay. The logic is simple: It works if you need to rent a car for only a few hours, even though it’s still fairly expensive.
At this point it might be good to remind everyone that last year Americans purchased over 17 million new cars, trucks, and SUVs, while China is coming up on 30 million new vehicle sales per year. One would think that, if the future were riding bicycles, electric push scooters, or even hoverboards around cities, that future would already be taking off faster and be more widespread than it is. After all, these are not technologies that are high priced today and simply waiting for wider adoption to reduce those costs.
But what’s taking off instead is speculation. And yet, no matter how often it’s discussed, there’s no real groundswell of demand making this a business reality — except among those investing in these companies.
One of the key points that Edelstein failed to make in his otherwise well balanced column on Maven is that, for what it cost him to rent that vehicle for just four days, that could make a monthly payment on any number of exceptional new cars today. Then you can have the car for the entire month and no mileage surcharges. True, in New York City one still has to pay for parking, and it’s incredibly costly. But for the rest of the nation, driveways and parking spaces generally come with our homes or apartment complexes.
Vision Delayed, or Denied?
Sixty years ago there was another visionary — and a successful businessman and elected official — who had excellent rationalization for his societal recommendations. It was Mitt Romney’s dad George, when he ran American Motors. In the mid-Fifties Romney lamented the waste in America that our love for bigger-than-life vehicles involves.
In a piece he wrote called, “The Dinosaur in the Driveway,” he bemoaned everything wasted when a small woman jumps in a 5,000-pound car to drive to the local drugstore just to pick up some bobby pins: road surfaces, gasoline, and all the materials for manufacturing that come with our love affair with everything big to drive.
Romney’s little Nash automobile, which one of the enthusiast magazines tested, got almost 30 miles to the gallon in traffic and 39.4 on the highway. Imagine how much money we would have saved in our lifetimes on gasoline with the Nash instead of the vehicles we’ve chosen to drive.
Then again, that Nash was really small, right at two feet shorter than today’s Toyota Corolla. Another way Romney would try to sell us on being more efficient drivers had to do with size vs. traffic congestion. At 224 inches long, one can fit 282 Chevy Suburbans nose to rear on one mile of highway, but that same road would handle 422 Nashes. So with Nash-sized cars you either save a fortune by not having to build roads and highways nearly as big as we have, or you can put a lot more vehicles on the road before congestion takes over.
History shows us that most of the American public rejected Romney’s logical advice. And I think he would be shocked to find that the automotive behemoths of his day have become even larger. But it’s almost equally certain that he would be shocked if individuals were suggesting motorized vehicles could be replaced by electric push scooters, bikes and hoverboards.
Of course, one day there will be a massive shift in all these things. When cars first made their arrival on the scene, only the wealthy could afford them. Even Woodrow Wilson stated that nothing was causing more Socialist feelings in the masses than the rich and their automobiles. So horses and wagons or carriages continued to be the norm, until Henry Ford got the price of his Model T down to $495 and the masses could finally afford to make the shift to automobiles. One day gasoline will go sky high, or possibly something could happen that puts it back on a rationed basis. If and when that happens, sales of electric cars, or other forms of transportation will take off.
That’s how financial evolutions of products give us economic shifts in technology. As for a world where nobody owns a car, but simply calls one up on demand and they are driverless, again, if the price for that product falls substantially below the cost of car ownership, that transportation shift will happen. But therein lies the problem. Those self-driving cars will cost more than many regular vehicles; and even though they can be run non-stop, except for refueling, it would have to be an experience equal to or better than buying a car and cost less to boot. Something not very likely to happen.
What’s truly disheartening is all of the billions — listed at $260 billion being spent on future electric cars and $61 billion on self-driving vehicles — that will be wasted if the executives overseeing these programs don’t understand how economic societies evolve. No public shifts in buying habits are coming our way until the new product is equal to or better than what we have now; and to take over completely, it has to cost less money. (Think record players and 45s becoming iPods and MP3 music.)
Then again, maybe they don’t teach economic fundamentals of change anymore in business schools. In that case, never mind.
© Ed Wallace 2018
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: firstname.lastname@example.org