The sharing economy: A futuristic taxi landscape (Part 4 – The coming of AVs)

The sharing economy: A futuristic taxi landscape (Part 4 – The coming of AVs)

Phuah Eng Chye (3 February 2018)

Sometimes it seems meaningless to further debate the competitive issues affecting the taxi industry as the pending use of autonomous vehicles (AVs) would change the landscape completely. The potential benefits of AVs have been much heralded. The main advantage is its anticipated effect on reducing road accidents – which reduces deaths and the need for medical treatment with extensive cost-savings. Lewis M. Clements and Kara M. Kockelman suggest “fewer collisions and more law-abiding vehicles, due to smarter, automated vehicle operations, will lower demand for auto repairs, traffic police, medical, insurance, and legal services.

It is also anticipated that AVs will likely to operate on electric platforms and reduce the level of pollution from vehicles. Nabeel Hyatt explains the trend towards electric is not so much about the environment but “primarily, it is because the cost of maintenance of an EV car is dramatically lower. If a single company owns the car and it has an incredibly high utilization rate, then that lower maintenance cost is easily worth the higher upfront cost.”

AVs are also expected to free up a significant amount of resources such as driving time and demand for cars and energy was well as reduce the space needed for roads and parking; the space used by car dealerships, mechanics and petrol stations “all become reclaimed territory”[1]. Hence, AVs will have a significant impact on land use, road and other infrastructure development.

Initiatives to pave the introduction of AVs is gaining momentum. According to Brooks Rainwater, “fifty-three cities worldwide are testing autonomous vehicles, with 35 instituting pilot projects.” The National League of Cities (NLC) latest report highlights “some 38% of America’s largest cities are preparing for self-driving vehicles in their long-range transportation plans” and that “twenty states have thus far passed legislation related to AVs.” In addition, “nearly every major car manufacturer has set a deadline of producing fully autonomous cars by 2021, with China’s Baidu aiming for 2019 and Tesla aiming for the end of 2017”. However, there are sceptics[2] who think the timelines are over-optimistic as significant technical obstacles are yet to be overcome.

The Regional Plan Association (RPA) envisages the deployment of AVs will take place over four phases. In the initial years, “automated features continue to improve and become less expensive, while car ownership declines” with greater use of semi-autonomous vehicles. From 2022 onwards, “fully autonomous vehicles are on the market, but AV and legacy vehicle mix results in uneven traffic improvements” with trucking services and ridesharing platforms the most likely to deploy AVs. RPA anticipates the cost of ride-sharing services will plummet during this phase.

The years up to 2040 will feature radical changes with sophisticated advances in autonomous technology improving connectivity between vehicles and infrastructure. According to RPA, roads will become narrower and the freed space can be utilised for bikes lanes, bus lanes, housing or open spaces. More charging stations will be installed and traffic signals will vanish. During 2027-2040, RPA projects the autonomous conversion of light-duty vehicle fleets will rise from 15 percent in 2030 to 75 percent in 2040. Beyond 2040, land use planning is permanently altered to make way for pedestrians, cyclists, and public spaces in both urban and suburban streets.

Substantial groundwork is required to enable large-scale use of AVs. Andrew J. Hawkins cautions “the self-driving cars are coming, and US cities are totally unprepared for the radical changes that will accompany them. Their roads are crumbling, their public transportation services are out-of-date and over-capacity, and their car traffic is among the worst in the world. Autonomous vehicles are supposed to be a panacea for mobility, but if they arrive to the status quo in our major metropolises, their promised benefits may never be realized.”

Hence, the RPA points out greater commitment is required to change “our streetscape, including new traffic management strategies and a re-evaluation of curb and other parking spaces”; including “to transfer space traditionally allocated for cars to high-occupancy transit and autonomous vehicles.”

Apart from the urban infrastructure, the other major consideration is the potentially deflationary effects of AV on the local economy. There are direct effects on road transport employment for vehicles such as taxi, bus and truck drivers and an indirect one on ancillary businesses related to the car industry such as mechanics, car dealers, car washes, auto parts stores and gas stations.

Apart from economic dislocation, ownership issues lurk in the background. One theme is that individual ownership of cars would decline and be replaced by corporate-owned fleets as scale provides cost-efficiencies. This futuristic scenario of centralisation and scale is underpinned by the ambition of domination but it is reminiscent of central planning where the streets are populated by fleets of small and lookalike cars owned by a few monopolistic companies.

The rationale for a monopolistic AV fleet is misplaced on two counts. One is the alternative can be to favour individual rather than concentrated ownership as this is more closely aligned with the philosophy of a sharing economy[3]. In this context, a driverless car is an income-generating asset (like property). A corporate owner would follow the same recipe as that for a capital-driven model to maximise yields – namely lobby for entry and price regulation and eliminate costs (of drivers). In a sharing economy, the (monopoly) firm can be disintermediated by enabling self-organisation – which means cars can be owned by individuals who can choose to earn extra income from allowing their AVs to be used as a taxi rather than to leave it parked.

The other is that cities are pursuing a different approach to minimise the number of cars on their roads.  The NLC report notes that “by 2020, expansion and improvement of transit systems and movement toward community design that favors accessibility and multi-modalism will enable more individuals to get to the places that they live, work, play, and pray without relying on the increasingly exorbitant expense of a single occupancy vehicle.”

In addition, there is the question of how the recommended infrastructure changes are to be funded. As it stands, there is already a shortage of funds to repair the existing infrastructure (e.g. roads, bridges). The infrastructure costs to facilitate AVs would add to the burden. It also raises the question of whether the infrastructure costs should be borne by the public or by the private sector and the impact of AVs on future city revenues.

As an example, Nabeel Hyatt points out that “cops will go from grossly underfunded to suddenly having 30 percent to 40 percent more time. What does that mean for police staffing and work? Or perhaps their funding will be an issue – more than $50 million in revenue is generated from parking meters in the city of San Francisco alone.”

Overall, the AV will be accompanied by massive dislocations. But fate of the taxi industry and drivers is the elephant in the room often conveniently left by the wayside as discussions focus on the future. This is fine where dislocation effects are minor, such as in Singapore with its limited space and a small population. But in places where the dislocation effects are substantial, greater consideration needs to be placed on manging the social consequences. Addressing the social consequences requires expanding our vision of the sharing economy beyond paradigms based on global domination and profits towards remaking the organisation of an industry into one that broadens participation and choice and that redirects a greater share of the value to individuals.

References

Andrew J. Hawkins (13 October 2017) “Self-driving cars are on a collision course with our crappy cities”. https://www.theverge.com/2017/10/13/16453926/self-driving-car-us-cities-uber-traffic-collision

Brooks Rainwater (1 December 2017) “Autonomous cars could reshape cities as we know them”. Businessinsider. http://www.businessinsider.com/autonomous-cars-could-reshape-cities-2017-12

Lewis M. Clements, Kara M. Kockelman (2017) “Economic effects of automated vehicles”. Transportation Research Record No. 2602. http://www.caee.utexas.edu/prof/kockelman/public_html/TRB17EconomicEffectsofAVs.pdf

Nabeel Hyatt (19 April 2017) “Autonomous driving is here, and it’s going to change everything: Welcome to the hands-free world.” https://www.recode.net/2017/4/19/15364608/autonomous-self-driving-cars-impact-disruption-society-mobility

Nicole DuPuis, Elias Stahl, Brooks Rainwater (November 2017) “The future of equity in cities”. The National League of Cities (NLC). http://nlc.org/sites/default/files/2017-11/Future%20of%20Equity%20in%20Cities%202017.pdf

Phuah Eng Chye (28 October 2017) “The sharing economy: Ridesharing and public transportation”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/the-sharing-economy-ridesharing-and-public-transportation/

Phuah Eng Chye (6 January 2018) “The sharing economy: Sharing, social media and information”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/the-sharing-economy-sharing-social-media-and-information/

Regional Plan Association (October 2017) “New mobility: Autonomous Vehicles and he region”. A Report of the Fourth Regional Plan. http://library.rpa.org/pdf/RPA-New-Mobility-Autonomous-Vehicles-and-the-Region.pdf

Yves Smith (30 December 2017) “Wired: Self driving car hype crashes into harsh realities”. Nakedcapitalism.com. https://www.nakedcapitalism.com/2017/12/124762.html

[1] Nabeel Hyatt

[2] Yves Smith

[3] Phuah Eng Chye “The sharing economy: Sharing, social media and the information society”.

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