COVID-19: The future mobility delusion

Beyond the panic and denial surrounding the initial stages of the coronavirus disease 2019 (COVID-19) pandemic, the world’s short-term response naturally emphasized the health aspect of the pandemic, which was then followed by the mid-term realization that one needs to ‘get through’ this in an economically viable manner that can ensure the solvency of the world economy. Only then is the economy able to refocus on the global long-term perspective. 

However, return-to-normality can only occur once a fully tested and approved vaccine becomes available in mass-volume to the global population. Any time before this will continue to be a highly sensitive and potentially contagious time for the world at large, in which intermediate solutions such as adjusting human behavior or utilizing technology will need to be embraced to safely navigate the world’s population.

Among the first observations that became apparent during the initial stages of the global COVID-19 pandemic were the contradictions that the (automotive) world at large was faced with.

Numerous governments around the world imposed very restrictive lockdowns which led to heavily reduced vehicle traffic levels. This encouraged large parts of the global population to embrace active mobility options such as walking or cycling in combination with the so-called ‘Open Streets’ initiatives that surfaced in cities across the USA. So while the ‘personally owned car’ was perceived as a safe place during the pandemic, it was also effectively reduced to a cameo role The implications of this could potentially affect the automotive and mobility sectors in the longer term. However, the more immediate effects that became visible was a noticeable reduction in vehicle accidents.¹

This highlights a further paradox for the automotive sector as the OES/replacement component market suffers initially, but lower vehicle usage rates also imply that vehicles could potentially last longer and eventually requiring more maintenance and spare parts. It was also witnessed that the lower traffic levels led to significantly higher (and often illegal) vehicle speeds causing more wear and tear.  

Arguably of greatest significance to the mobility sector could be the “work from home” (WFH) revolution that enabled so many businesses to continue their activities during the COVID-19 pandemic. If this becomes more sustained in the mid- to long-term future – which is a big IF – surely it will reduce vehicle miles traveled (VMT)? Let us think this through for a moment; in most large/mega-cities today the majority of commuters do not drive to their workplaces, but instead utilise public transit (PT) modes as traffic congestion and scarce parking availability (read expensive) effectively make driving ‘not an option’ for millions of commuters. So, will maintained WFH habits reduce VMT? Clearly there will be regional variations, as the United States, for example, only features a limited number of main cities where PT is a viable alternative option for commuters; in all other US cities VMT could indeed suffer. ² In many European cities selected demographics may decide to ‘leave the dense city’, which is perceived as dangerous and/or contagious and move to the rural area. But if the commute did not involve vehicle VMT and now they live in rural areas where vehicle usage is essential for shopping/medical/entertainment purposes, the VMT could potentially increase. 

Other wider societal aspects in which the COVID-19 pandemic could manifest itself over the mid- to long-term outlook – from a mobility perspective – are similarly clouded with uncertainty at this point. Media reports from China ³ suggest that prolonged home isolation measures could lead to higher divorce rates, which could potentially lead to more car sales as a typical ‘one car family’ might now become ‘two families in need of two cars’. Of course, this could be countered by increased usage of new mobility solutions instead, given that ride-hailing and car-sharing operators ⁴ in China experienced relatively quick ‘return to almost normal’ business conditions. 

A further, and more immediate, potential societal impact of the COVID-19 pandemic centers around the “lock down” measures and the often associated ‘contact tracing’ initiatives to try to track and contain the number of infections. Could this potentially lead to more regulatory control over people movement and mobility providers for medical tracking and potential restrictions purposes? Perhaps it could pose an even greater opportunity for selected technology giants looking to further exploit mobility opportunities? Other technology companies might be keen to further push artificial intelligence (AI) camera-based solutions utilizing light detection and ranging (LiDAR) sensors to enable surveillance tracking of social distancing compliance, possibly even helping vehicle manufacturers to limit potential duty-of-care legal liability issues during the re-start of vehicle manufacturing operations. Either way, this could present a whole new business opportunity for LiDAR sensors, which might help to cut costs and further the advances of autonomous vehicle (AV) technology.

The previously booming Mobility-as-a-Service (MaaS) sector – such as ride-hailing or car-sharing — is currently facing its first global crisis, and the initial impact has been devastating to say the least. Recent Lyft and Uber financial releases suggest trip requests were down by between 75% to 80% respectively; while it is not as bad as the impact on PT at about 90% ⁵ decline, it does highlight that the current ‘fear factor’ for MaaS is a major issue that could potentially derail the success story.    

So far consumers around the world have been abstaining from MaaS apps and have been returning to the perceived safety of the personally owned car owing to the COVID-19 situation. In our view it is unavoidable that the growing reliance on personally owned cars will continue for the short- to mid-term outlook, especially as vehicle manufacturers will be keen to exploit this opportunity for perceived safety and cleanliness. Expect new solutions for vehicle interiors that fend off germs (especially for steering wheels, door handles, and high-grade air filters) as these will continue to amplify the safety of personally owned cars. Ironically though, these solutions will also become the enablers for MaaS to come back with a new, clean, and safe image until the emergence of a COVID-19 vaccine that could enable a re-birth of the MaaS sector. However, lately the only ray of light for the MaaS sector has been the growing success of food delivery and bicycle-sharing activities. Hence, the pursuit for the robo-taxi panacea – including for goods delivery – remains a high priority for the MaaS providers.

Even though during the initial impact of the pandemic the oil price was in historically low territory, our future mobility solutions remain perfectly suited for electrification despite the COVID-19 outbreak. The pandemic highlighted the perceived contagion fear of handling the liquid fuel pump to fill up the internal combustion engine (ICE) vehicle. Even in times of exceptionally low oil prices most consumers are still likely to value safety, and this newfound fear could help to persuade drivers to safely ‘refuel’ their electric vehicle (EV) at home knowing that no strangers have handled the charger before them. Of course, in the short term we do expect some initial setback to EV penetration (depending on geographic region and fuel-efficiency regulation) as the pandemic did increase indebted consumer levels, which challenge EV affordability, and further policy support such as ‘green’ scrappage schemes could be necessary to further address this. But overall, the COVID-19 pandemic led to improved air quality, less traffic, and more active mobility. So gradually expect more consumers to put EVs on their shopping list in the mid-term by 2030. 

Ironically, one of the beneficiaries of this trend could also include the automotive sector, as the COVID-19 pandemic also exposed the vulnerability of the world’s manufacturing supply chain, and as the EV typically comprises significantly fewer components compared with more complex ICE vehicles, it could help to simplify the supply chain.

Finally, another sector that appeared to be affected by COVID-19 was the prospect of AV in the medium term. Paradoxically, instead of AVs transporting people, the 2020 image of AVs are robot-shuttles carrying COVID-19 test samples and/or equipment within a hospital campus: smaller autonomous robots disinfecting offices and metro stations or contactless delivery of essential food supplies. These new technology applications were highly visible in Wuhan and other major Chinese cities, where they facilitated people’s lives during the severe pandemic lockdown resulting in very high trust levels among the Chinese people. Now that contactless delivery has become critical in times of social distancing, the AVs seem to have found a more immediate usage-case that could appeal to a larger business community, but which could delay the originally planned roll-out for AV passenger cars significantly.

In all it becomes clear that it is harder than expected to determine any lasting impacts on future mobility from the double-edged sword that is COVID-19. Nothing is as it seems! The COVID-19 constant fear of contagion, followed by waves of infections and finally, when it seems safe to return to some form of normality the automotive sector could get hit by what can best be described as the great mobility delusion. Hence, further research remains necessary, and IHS Markit is in the middle of a dedicated research program uncovering exactly these and other issues; all centred around the themes of mobility channels, technology, remote working, personally owned cars, societal issues, and cities.  Results of this research will be available during the summer of 2020.

Sources:

¹According to the British Government traffic during the lockdown was down by 75%; and British car insurers reported an almost 50% drop in UK claims during the initial lockdown. While in Russia the city of Moscow reported pre-lockdown that accidents had already reduced by 28% due to less people driving.

²Prior to the COVID-19 pandemic there was an approximate 5% WFH rate in the USA; during the peak of the pandemic this number jumped to close to 50% for the people that had the ability to work from home or could not go to work because of restrictions, resulting in an overall halving of American gasoline demand during the peak.

³Chinese media reports from the cities of Xian and Dazhou reported record-high numbers of divorce filings in early March; while Shanghai’s Gentle & Trust Law Firm says divorce caseloads had increased 25% since the city’s lockdown eased in mid-March.

⁴Didi Chuxing, China’s leading ride-hailing provider, announced early May that it’s ride volumes in China had reached 60%-70% of pre-COVID-19 levels. While Mobje Carsharing, jointly owned by FAW and Volkswagen, was back to pre-COVID-19 levels two and a half months after demand was hit by the pandemic.

⁵Transport for London (TfL) announced that tube/train usage declined by 95% during the peak of the lockdown; while bus usage declined 85% during the peak of the lockdown.