HOW COVID-19 WILL SHAPE URBAN MOBILITY - By Julien Bert, Daniel Schellong, Markus Hagenmaier, David Hornstein, Augustin K. Wegscheider, and Thomas ...
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HOW COVID-19 WILL SHAPE URBAN MOBILITY By Julien Bert, Daniel Schellong, Markus Hagenmaier, David Hornstein, Augustin K. Wegscheider, and Thomas Palme Just a few months ago, cities all over the world were in the midst of a mobili- remains, urban mobility faces two challeng- es: consumer behavior and attitudes have ty renaissance. New forms of shared and shifted, and disposable income has shrunk. connected mobility were taking root, Social distancing practices, along with fear augmenting overburdened public-transit of the close physical contact that’s often in- systems and offering convenient, eco- evitable in urban transportation, raise the friendly alternatives for commuting and question: Is this the beginning of the end urban travel. Then came COVID-19. When of the new urban mobility ecosystem—or lockdowns halted normal everyday life, just a temporary bump in the road? The commuting and leisure trips for many fact is, the need for new modes of mobility millions of people came to an abrupt halt. hasn’t changed and neither has their social Urban transportation usage plummeted to or environmental value. Moreover, a vi- its lowest level in decades. brant mobility ecosystem is vital to cities’ economic recovery. So what must mobility Meanwhile, the pandemic forced compa- providers, municipal leaders, governments, nies to adapt fast, and now many people and investors do to restore public confi- are recognizing that there is actually anoth- dence and get the new mobility back on er way to live and work. Google and Spoti- track? fy recently announced that employees can work from home until the end of this year; To answer that question, BCG conducted a Twitter, Square, and Facebook will allow survey of 5,000 residents of major cities in most of their employees to telecommute the US, China, and Western Europe permanently. (France, Germany, Italy, Spain, and the UK). (See the sidebar “About Our Survey.”) But how deep and how long-lasting will Our goal was to understand people’s trav- such changes be? As business activity re- el-related concerns and priorities by asking sumes but the threat from the coronavirus them a series of questions about their actu-
ABOUT OUR SURVEY At the end of April, BCG surveyed 5,000 2 million, and their median age is 42. urban residents: 1,000 in the US, China, The survey pool was divided almost and Germany, and another 500 each in evenly by gender, and the largest share France, Italy, Spain, and the UK. (See the of respondents (43%) were in the exhibit below.) By then, China was no middle-income bracket (brackets were longer in lockdown, but Europe and the adjusted according to each country’s US were. More than half the respondents level of prosperity). live in cities with populations exceeding Survey Demographics City size Age Up to 30 More than 500,000 28.1% 25.6% 30.4% 31 to 50 but fewer than 1 million 51 and older 54.0% More than 1 million but fewer than 2 million 18 42 69 More than 2 million 15.6% 46.3% Min Mean Max Household income Gender 20% 43% 29% 7% Male 49.7% 50.3% Female Lower income Middle income Upper income No answer Source: BCG survey (5,000 urban residents in China, the EU, and the US). al and anticipated behavior in the course Some e-scooter and car-sharing services of three specific periods: during lockdown; suspended service temporarily, while others over the short term, as lockdowns are lifted maintained operations, implementing sani- but the threat of contracting COVID-19 re- tizing and other hygienic measures. Some mains (as does the possibility of subse- reduced their rentable fleet to cut costs. quent lockdowns); and in the medium term, some 12 to 18 months from now, as Not surprisingly, the use of privately owned treatments and a vaccine presumably be- bikes and e-scooters rose in all three of the come available. regions we surveyed, and bike sharing in- creased in the US and China, aided by reg- ular disinfection and price reductions. Lockdown Travel Apart from providing a way to avoid con- During the lockdowns, the use of nearly ev- tact with others, bikes offered a healthy ery mode of transportation fell precipitous- and convenient alternative and the oppor- ly. (See Exhibit 1.) Cities kept public transit tunity to be outdoors, where the risk of in- running to provide low-cost transportation fection is minimal. Some cities, in fact, fa- for essential workers; they were forced to cilitated bike use by closing streets to act quickly and change their business mod- motorized vehicles and creating pop-up el to meet the requirements of a rapidly bike lanes. changing environment, with frequent sani- tizing of subway and rail cars and buses, Private-car travel, which supplanted public contactless payment, and other measures. transit and ride hailing (among other less- Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 2
Exhibit 1 | Use of Most Transport Modes Declined During Lockdowns TRANSPORT MODE US EU CHINA SHORT-TERM MEASURES • Reduced frequency Public transit • Disinfection of seats, poles, and other high-touch surfaces (metro, bus, tram) • Compulsory masks for staff (and, in some places, passengers) • Limit number of passengers in shared rides Ride hailing (pooled) • Protective sheet between driver and passengers (on demand, multiple passengers) • Temporary suspension of service +60% or more • Free masks, hand sanitizer, and cleaning supplies for drivers Taxi and ride hailing • Frequent disinfection (e.g., every 4 hours) (on demand, single passenger) • Protective sheet between driver and passenger +21% to +59% • Increased cleaning and sanitizing Car sharing • Temporary reduction of fleet or suspension of service (free floating or station-based) • Price reductions and package prices • Regular disinfection of handlebars and seats ± 20% Bike sharing • Price reductions (free floating or station-based) • Temporary suspension of service Scooter sharing • Temporary suspension of service N/A –21% to –59% (only available in US and EU) • Regular disinfection of handlebars Own bike/e-scooter, walking • Pop-up bike lanes (including subscriptions) • Closure of entire roads to cars –60% or more Private car • Suspension of road tolls (including for bridges and tunnels) (one’s own or company owned) Sources: Press search; expert interviews; BCG analysis. Note: Lockdowns include mandatory and nonmandatory quarantines, business closures, and bans on events or gatherings. Arrows indicate a change in usage based on observations in cities per region. used modes), declined, as reflected in the ly, the travel modes perceived as riskiest reduction in the overall number of trips. In were those offering little physical distance the US, vehicle miles traveled fell national- from fellow passengers and those requiring ly at least 65%, and in some states (in early contact with high-touch surfaces. April), by as much as 80%, according to StreetLight Data. Interestingly, some re- The least risky travel modes? Cars and oth- gions reported significant increases in the er types of solo travel. On average, Chinese proportion of speeding tickets compared respondents perceived the risks associated with the same period last year, as drivers with all modes to be lower than did their took advantage of emptier roads. European and US counterparts. US respon- dents were the most wary of mass transit and shared modes. That could be a func- Travel Practices During tion of timing, however, as the pandemic hit Lockdown and in the Short the US later, and the country is emerging Term Post-Lockdown from lockdown later and in a nonuniform Now that lockdowns around the world are way. It could also be a reflection of less reli- being lifted or eased, and as urban travel ance on public transit in many US cities. begins to rebound, what criteria will drive city dwellers’ transportation choices? How do consumers expect to behave in the short term, post-lockdown? Between 40% Social Distancing and Cleanliness. Physical and 60% of respondents in all three regions distance and cleanliness were by far the said they will be using public transit less or two most important criteria during lock- much less frequently, in favor of walking, down for almost half the respondents to biking, or driving their own car. (See Exhib- our survey, and this will likely continue. it 2.) Other shared-mobility modes, such as Cost came next (and over time, as more ride hailing and car sharing, will also be people resume their daily commute and used less often, but they won’t experience regular routines, cost could resume its declines as sharp as public transit’s, accord- place as their top priority). Not surprising- ing to our survey. Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 3
Exhibit 2 | Change in Urban-Mobility Use Immediately Post-Lockdown Percentage of respondents 0 20 40 60 80 100 Mean US –0.6 Public transit EU –0.7 China –0.8 US –0.4 Ride hailing EU –0.2 (pooled) China –0.6 Taxi and US –0.5 ride hailing EU –0.3 China –0.5 US –0.2 Car sharing EU –0.2 China –0.5 Micromobility US –0.2 sharing (bikes, EU –0.1 e-scooters) China –0.4 Own bike/ US 0.1 EU 0.2 scooter, walking China 0.1 US 0.2 Private car EU 0.2 China 0.5 Much less frequently Less frequently Same as before More frequently Much more frequently –2 –1 +1 +2 Source: BCG survey (5,000 urban residents in China, the EU, and the US). Of the three main populations surveyed, portion in Europe (63% of respondents) the Chinese showed a stronger tendency on and in the US (78%) said they would only both counts. In the short term, they are re- travel alone in their own car. Respondents lying less on public transit. Our survey, con- noted that they were not inclined to buy a ducted after China’s lockdown was lifted, transit pass, a reflection of their uncertain- suggests that public-transit usage had been ty about the total number of trips they declining for some time; many Chinese had would take in a given month and the mode been voluntarily staying home for months, of transportation they would choose. including many who weren’t in quarantine or lockdown. Chinese respondents also said Avoidance may be a harder tactic to keep they were more likely to walk, bike, and up over time. It’s telling that even those drive their own cars, rather than use public who continued to use public transit during transit. This is entirely logical, considering the peak of the outbreak modified their be- that these are the lowest-risk modes of havior in some way. So while travel pat- transportation in places under lockdown terns during lockdown were highly disrupt- ed, it remains to be seen how persistent Avoidance Strategies. With commuting avoidance will be once people are again on halted for the vast majority during lock- the move—and what that will mean for fu- down, people could be more flexible about ture demand. when to travel, and many made adjust- ments to minimize contact. Overall, around Car Appeal. More than 60% of Chinese one-third of respondents said they were respondents said they were more likely to traveling at different times of the day to buy a car post-lockdown than they were avoid crowds during lockdown, and nearly before the crisis. (See Exhibit 3.) Their one-quarter said they would only board interest was high across all income brack- public transit if there were ample empty ets. About 80% of upper-income respon- seats. Chinese respondents practiced these dents and around 60% of middle-income habits considerably more than Europeans respondents said they were more likely to or Americans. At the same time, a sizeable buy a car now than they were before. Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 4
Interest was high even in the lower-income to spend less are some who also expect to group, with 44% saying they were more rely more on a private car, two expecta- likely to buy a car post-lockdown. tions that seem contradictory. This suggests that these respondents might be underesti- In contrast, a significantly smaller percent- mating the cost of owning a car, perhaps age of respondents in the US and the EU because the most obvious variable cost expressed an interest in buying a car associated with car use—fuel—is now post-lockdown. Why? Several factors are much lower with the global oil supply glut. potentially at work. Car ownership in Chi- na is still relatively low compared with oth- Interest in Bikes. In the US, bike sales are er regions; for many, a car is an aspiration- booming: sales of bikes, related equipment, al purchase. Private cars are also attractive and repair services almost doubled in because they’re a safe form of transporta- March compared with the same period in tion. Just before the lockdown took effect 2019. British Cycling, an advocacy group, in Hubei province, only people with their estimates that COVID-19 might prompt own car were able to leave town. And some 14 million Britons to choose a bike during lockdown, when access to public over a car, according to the World Econom- transportation was restricted, only those ic Forum’s COVID Action Platform. Bikes with a car could travel freely around the offer an alternative to public transit and an city. Finally, with international travel all opportunity to exercise and be outdoors. but impossible for much of the rest of 2020, it’s probable that more Chinese, like peo- Loyalty. Those who used a given mode of ple everywhere, will want to travel domes- transportation more than ten times a week tically by car. pre-COVID are likely to stick with that choice. In the short term, between 67% and Spending. In the near term (as shown in 76% of heavy users of shared mobility plan Exhibit 3), the tendency among most to continue using (or to increase their use respondents appears to be to spend less, of ) those modes—which include solo or suggesting that they expect to travel less pooled ride hailing, taxis, car sharing, and often. Among the respondents who expect bike and e-scooter sharing. (See Exhibit 4.) Exhibit 3 | Anticipated Spending on Mobility Post-Lockdown Change in likelihood after lifting of restrictions 0 20 40 60 80 100 0 20 40 60 80 100 US Upper income Buy a car EU US Middle income China Lower income US Upper income Buy a bike EU Middle income EU or scooter Lower income China Upper income US Buy a metro pass China Middle income (monthly/annual) EU Lower income China US Try new-mobility EU services China Much less likely Less likely Same as before More likely Much more likely No answer/don’t know Source: BCG survey (5,000 urban residents in China, the EU, and the US). Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 5
Exhibit 4 | User Loyalty Varies by Mode and Depends on Frequency of Use 100 86 87 84 82 80 76 76 69 71 67 66 Loyal users (%) 60 55 50 49 51 49 48 44 44 39 38 40 36 20 0 Public transit Ride hailing Taxi/ride hailing Car sharing Micromobility Own bike/scooter, Private car (pooled) sharing walking (bikes, e-scooters) Casual users: less than once/week Frequent users: 1 to 10 times/week Heavy users: >10 times/week Source: BCG survey (5,000 urban residents in China, the EU, and the US). Note: Loyal users are defined as those who will use a given transport mode to the same or a greater extent after lockdown restrictions are lifted. Not surprisingly, casual users (those who services can promise cleanliness and mini- used a given mode less than once a week, mal risk of infection (and if they weather on average) are the least loyal. Respon- the financial shocks they’ve experienced), dents registered the least loyalty to public individual ride hailing could rebound in transit, regardless of previous frequency of most regions. It’s worth noting that bike use. Those who walked or who drove their sharing in China, the country first hit by own car, bike, or scooter pre-COVID are COVID-19, rose 150% immediately post- likewise highly likely to stick with those lockdown. And shared modes, whether options. bikes, e-scooters, or even cars, offer users the benefits of private, dedicated use with- It’s important to bear in mind, however, out a large investment. that the choice of mobility mode is always determined by the value proposition, in- cluding price. So once commuters return to The Medium-Term Outlook their normal routines, economics and con- What will urban consumer sentiment look venience may well overrule other consider- like over the next 12 to 18 months (mid- ations. Still, the pandemic has heightened 2021 through year-end 2021), when more people’s sensitivity to physical distance targeted treatments or even a vaccine for and cleanliness. This will probably fade COVID-19 becomes available? Respondents over time, but in the short term, public to our survey indicated that over time, as transit and pooled mobility will suffer. For the crisis fades, their safety concerns won’t example, in mid-May, when Germany be nearly as acute, and their use of shared emerged from lockdown, public transit use mobility and public transit will increase. bounced back to only 50% or 60% of its normal level, according to data from Ap- We see two potential medium-term scenar- ple’s Mobility Trends Reports. ios: Who wins in the short term? Most likely in- •• The increased use of private mobility dividual mobility modes, such as cars, may have some staying power. This is bikes, and e-scooters. Car sharing will re- especially likely if the perceived risk of main popular in Europe, and if ride-hailing public transit and shared mobility Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 6
remains high. If respondents’ current sanitizing and other safety measures to re- sentiments persist, we could well see a duce risk and instill confidence. There are resurgence of private car use (not just only so many options for urban passengers, as a reliable means of transportation in and fear does fade, supplanted by practical town, but also as a way to get out of the reality. (Recall the widespread vows to nev- city during lockdowns and on weekends er fly again in the wake of 9/11.) Moreover, and holidays). consumers opt for value—the best combi- nation of features and cost—and many, es- •• On the other hand, public transit and pecially commuters, rely on public transit shared mobility could make a come- because of its affordability. If they haven’t back. We believe this to be the more already, these people would benefit from likely scenario, providing stakeholders shared mobility for the same reason. put in place the right measures and incentives to discourage the use of This second scenario is also more desirable, private cars in urban centers. As Exhibit for city residents as well as for city officials, 5 shows, the short-term reluctance to because it means less pollution and less use public transit (50% of respondents) traffic congestion. Assuming cities respond will decline by about half. Indeed, in effectively to restore faith in public transit the US and Europe, the survey suggests and support eco-friendly mobility modes, that use of micromobility (mainly bikes the only pandemic-related trend that en- and e-scooters) will return to precrisis dures may be the rise of flexible ownership levels. Again, these results were ob- models, in everything from cars to e-scoot- tained during lockdown, a period when ers. respondents were generally unsure and unsettled about the potential dangers of using public transit. Getting the New Urban Mobility Back on Track The second scenario depends to a great ex- What can mobility providers, policymakers, tent on providers’ ability to continue with and investors do to restore beleaguered Exhibit 5 | Change in Urban-Mobility Use Over Time Percentage of respondents 0 20 40 60 80 100 Mean Public transit Short term –0.7 Medium term –0.3 Ride hailing Short term –0.4 (pooled) Medium term –0.2 Taxi and Short term –0.4 ride hailing Medium term –0.2 Short term –0.3 Car sharing Medium term –0.1 Micromobility Short term –0.2 sharing (bikes, Medium term –0.1 e-scooters) Own bike/ Short term 0.2 scooter, walking Medium term 0.2 Private car Short term 0.2 Medium term 0.2 Much less frequently Less frequently Same as before More frequently Much more frequently –2 –1 +1 +2 Source: BCG survey (5,000 urban residents in China, the EU, and the US). Note: Short-term = immediately after lockdown restrictions are lifted; medium-term = the next 12 to 18 months, when COVID-19 treatments and/or vaccines are expected to be available. Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 7
public-transit systems and new-mobility brought municipal leaders to a crossroads. modes to health—and revive the urban Restoring ridership to precrisis levels may mobility agenda? be necessary to restoring the financial health of public-transit systems, but riders Mobility Providers. For providers, ensuring will only let a full bus go by so many times the health of staff and passengers is the top before they choose an alternate mode. priority. Many of the practices that compa- Economic factors must be balanced against nies introduced during the pandemic, such concerns about the risks of overcrowding. as the use of protective plexiglass panels That means, for example, tailoring service and motorized sanitizing stations for frequency to actual demand patterns, drivers, could become standard. instead of relying on traditional tactics like weekend schedules. Transit authorities Meanwhile, the wave of layoffs is one more need to ensure that riders have an incen- indication that consolidation is likely—and tive to buy monthly passes, or the econom- an important development in a market ic hit could be significant and trigger where price competition to gain share was undesirable effects throughout the mobility pummeling revenues even before the crisis ecosystem. hit. (Uber’s sale of its bike-share business, Jump, to the scooter company Lime dem- Like the sharing companies, public-transit onstrated how tough the micromobility systems will need to invest significantly in market has become.) regaining the public’s trust over the longer term. Maintaining or implementing sanitiz- Mobility providers will need to focus on ing practices is a clear imperative, given streamlining operations and optimizing the sheer volume of passengers served. costs to curb cash burn. This includes re- New tools, such as the disinfection robot ducing fixed costs; cutting nonessential that Hong Kong has successfully trialed in processes; trimming offerings, fleet size, or train cars, may help with that effort. Cities city portfolios; and renegotiating with sup- also need to find ways to accommodate a pliers. It may even require pausing services higher volume of passengers more safely, temporarily. by running buses, subways, and trams more frequently, for example, and trying out new On the revenue side, providers will need to hybrid models, such as pooled minibuses, zero in on the most profitable cities and fo- which transport far fewer riders but offer cus on stabilizing income efforts—by cater- more elbow room. ing to alternative customers, such as essen- tial workers, for example, or offering cargo Extending short-term support to local or food delivery. Revenues of the food de- new-mobility service providers could help livery service Uber Eats exceeded those of cities meet normal demand without com- Uber’s passenger transport service in the promising consumers’ safety. For example, US for the first time in the first quarter of they could pause or waive operating licens- 2020. Providers should also consider alter- es or parking fees, offer providers credit, or native pricing schemes, such as monthly even invest in their services. passes and volume discounts, to attract cus- tomers. As federal, state, and municipal govern- ments focus on gearing up their economies, Finally, new-mobility services should make they may be tempted to encourage spend- a greater effort to partner with cities to of- ing on automobiles, especially given the re- fer cooperative arrangements such as mul- newed attraction of private ownership. timodal access. In this way, they would (China and France have already announced help integrate public transit with other mo- that they will be offering car-buying incen- bility options and, in particular, offer first- tives.) But given the need (and, in some and last-mile micromobility solutions. cases, the legal obligation) to reduce urban congestion and control emissions, munici- Cities and Policymakers. COVID-19 has pal leaders must be proactive about stav- Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 8
ing off an increase in private cars. Two Current investors in mobility services will proven tactics are congestion pricing (dis- now turn to working with their portfolio counting tolls during off-peak hours) and firms to reduce the burn as much as possi- increasing downtown parking fees. ble in order to rebound postcrisis. But they will need to stay calm and hold the line. Another strategy, which has won many We expect that the new mobility will recov- more advocates during the pandemic, is to er and that, on average, the industry will promote biking and walking. The UK re- provide positive profit pools in the not too cently announced a £2 billion package to distant future. In the long term, new forms put cycling and walking “at the heart of” of mobility must prevail if urban centers Britain’s post-COVID transportation plan— are to remain vibrant and sustainable. intended, in part, to protect the public- transport network. In May, Milan began re- allocating 35 kilometers of streets for bicy- cle and pedestrian use only, adding tempo- rary bike lanes, widening pavements, and R eliable, accessible, and affordable transportation that minimizes environ- mental impacts is still a critical need. Resi- designating certain streets as “pedestrian dents and policymakers everywhere under- and cyclist priority.” Paris, too, is develop- stand that a sound public-transit system, ing a plan to discourage cars from regain- biking infrastructure, and new and shared ing dominance on its streets. forms of mobility are vital to the economic lifeblood of their cities. The fundamental No matter what, in the effort to restart value proposition underlying the new mo- their economies, governments should not bility has not changed. Business models neglect support for public transit and may need to be modified, but user eco- new-mobility modes, whether in the form nomics, environmental health, and general of subsidies for sanitization programs or societal interests only reinforce the value of funding for designated bike and scooter a diverse urban mobility ecosystem. Restor- lanes or parking spaces for car sharing. ing cities’ economic health post-COVID-19 depends on it. Investors. Overall, big sums of money remain in the market and in investment funds. Investors are watching closely to identify the relative winners in mobility postcrisis. Given the amount of funding that so many mobility startups need, consolidation is inevitable. So are “down rounds” (in which valuations are lower than in the previous funding round). Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 9
About the Authors Julien Bert is a managing director and partner in the Munich office of Boston Consulting Group. He works with automotive and mobility clients and leads BCG’s Center for Mobility Innovation. You may con- tact him by email at bert.julien@bcg.com. Daniel Schellong is a principal in the firm’s Berlin office and a leader of its work in automotive and mo- bility, with a focus on digital business models and new forms of mobility. You may contact him by email at schellong.daniel@bcg.com. Markus Hagenmaier is an associate director in BCG’s Vienna office. He is an expert on the future of mobility and leads the global operations of the Center for Mobility Innovation. You may contact him by email at hagenmaier.markus@bcg.com. David Hornstein is a consultant in the firm’s Berlin office who focuses on digital business and mobility. You may contact him by email at hornstein.david@bcg.com. Augustin K. Wegscheider is a partner in BCG’s Chicago office and the leader of the Center for Mobility Innovation in North America. You may contact him by email at wegscheider.augustin@bcg.com. Thomas Palme is a managing director and partner in the firm’s Beijing office and the leader of the Cen- ter for Mobility Innovation in China. You may contact him by email at palme.thomas@bcg.com. Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation—inspiring complex change, enabling or- ganizations to grow, building competitive advantage, and driving bottom-line impact. To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and through- out all levels of the client organization, generating results that allow our clients to thrive. © Boston Consulting Group 2020. All rights reserved. 6/20 For information or permission to reprint, please contact BCG at permissions@bcg.com. To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com. Follow Boston Consulting Group on Facebook and Twitter. Boston Consulting Group | How COVID-19 Will Shape Urban Mobility 10
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