ALEXANDRIA, Va. -- Uber and Lyft, Zipcar and Car2Go: Shared-travel services such as these have the potential to revolutionize transportation.
But when? And how? As the Fuels Institute prepares an update to its April 2016 study Shared Travel: Revolution or Evolution?, CSP Fuels spoke with author Hart Schwartz about the biggest unanswered questions about these relatively new and still evolving services.
“It’s definitely a new form of transportation, but it’s only incrementally new at the moment,” said Schwartz, an external research associate for the Fuels Institute. “The question is whether it will be revolutionary.” Let's take a look ...
1. Who uses shared-travel services?
Surprisingly little is known about the customers of ride-sourcing services such as Uber and Lyft and car-sharing services such as Zipcar, Car2Go and Enterprise Carshare. The services tend to operate in densely populated urban areas with fewer vehicles and people per household; lower median age than the U.S. average; a higher median household income than the U.S. average; and a higher level of education than the U.S. average.
“But it’s where people live that’s most important; the density in population creates supply and demand,” said Schwartz. “There are going to be more people who don’t have vehicles and are using other modes besides vehicle ownership.”
What’s not as well known: the average age of users (even though these services often target millennials), the gender breakdown or how customer demographics vary by the type of shared-travel service.
“The data is impossible to get,” said Schwartz, whose own repeated efforts to get customer data from the providers came up empty. “The data these companies have is their competitive advantage.”
2. What do shared services compete against?
The degree of competition between different types of shared-travel services, as well as the degree to which they complement or replace traditional transportation choices, is still being revealed, said Schwartz.
“The broader question is one of consumer choice,” said Schwartz. “Until the last 10 years, there were basically private automobiles, walking, transit and bicycles to get around in cities. Now we have this app-based travel, where you booked a car, and this is a profoundly new consumer choice.”
It will likely take three to five decades before these questions are fully answered, said Schwartz.
“However, in the short term, trends like the Internet of Things and self-driving vehicles are going to enter in the next five to 20 years in the market,” he said. “Once those enter, car sharing will probably be accelerated.”
3. What effect do gas prices have?
While it seems as if low gasoline prices could curb the use of shared-travel services—it reduces a cost consideration for owning a car—this is not necessarily proven out by data, said Schwartz.
“Indirectly, gas prices are such a small component of the household budget,” ranging from 1% to 2%, he said. Fuel is also a small component of households' vehicle travel budget compared to bigger costs such as insurance, registration, licensing fees and depreciation.
“Depreciation is by far the biggest cost of vehicle ownership—it’s three times higher than any other cost,” said Schwartz. “And that cuts to the core of it: With shared vehicles, if somebody’s going to drive their vehicle for Uber, for the extra miles and depreciation they incur, does the revenue they get from driving Uber justify the depreciation?”
4. How do shared-travel services affect fuel demand?
If more people are traveling by fewer vehicles, one might expect fuel demand to drop. But for now, shared-travel services are not really affecting fuel demand, said Schwartz.
For example, there are only about 10,000 Zipcars—a car-sharing service—in the United States, out of 250 million registered vehicles.
“We’re talking 0.00001% of all registered vehicles,” said Schwartz. Even Uber and Lyft’s fleets combined—about 250,000 vehicles—are still a fraction of a percentage of the overall vehicle fleet.
That said, if these services intensify vehicle usage, then hypothetically, fuel demand could actually increase.
“If you have the same amount of vehicle travel with fewer vehicles, it probably won’t do anything,” said Schwartz. “But if these ride-sharing services cause more trips to happen in private vehicles instead of public transit, that could have an impact on increasing fuel demand because private vehicle trips are happening that wouldn’t otherwise.”
5. What role does geography play?
“People don’t think at first of the physical context in which these services occur,” said Schwartz. “They think you have apps, all based on communication devices. But the layout of American cities and the forces that drive them are paramount to understanding how far these services can develop.”
For example, even cities with the same population size could vary dramatically in their mix of transportation options. Schwartz points to the difference between Boston, where many inner-city streets were designed with horse travel in mind, and Los Angeles, where the automobile and modern freeways provided the transportation framework.
This physical context, in turn, defines and constrains how residents choose between transportation options.
6. What headwinds do you see to faster growth of these services?
The ability to insure shared vehicles has initially proven one of the biggest challenges to the growth of shared travel, although the insurance market has begun to respond with products to meet the demand, said Schwartz.
From here, issues that would prevent shared travel from becoming truly revolutionary include the public’s safety and cyber-security concerns around self-driving vehicles, because they hold enormous potential for these types of services.
Another issue: low population density.
“You need high density so far to sustain these services,” said Schwartz. “If most people are living at low densities, why would they adopt shared services as their main form of transportation? It doesn’t make sense.”
The update to the Fuels Institute study on shared travel is expected by spring 2017. To read the 2016 study and other transportation-related research, click here.