8 Jul 2016

The End of Public Transport As We Know It?

As a year comes to an end it is an ideal time to review, reflect, and also consider what might be in stall for us in the years to come.  What might be the important structural themes that create the industry leaders of the future? 

At Castle Point we seek to hold a portion of our portfolio in small, growing businesses that are well managed, in supportive industries, and have the potential to grow for decades becoming substantially larger than they are today. While not completely necessary, it clearly helps to be in a growing industry with fantastic prospects.

The Cloud, Internet of Things, Big Data, and Aging Demographics are all examples of important structural themes. However, there is already plenty to read elsewhere about those.  Here is a more leftfield theme that could be just as significant as any of those.

It was recently reported that the Government and the Auckland Council are at loggerheads over a start date for the $2.4 billion underground City Rail Link.  The council has moved the start date from 2016 to 2018. The Transport Minister, Simon Bridges, remains committed to a 2020 start date.  Also, it was recently announced in the United Kingdom that driverless cars are set to be tested in four English cities.  The tests will last from between 18 to 36 months and began on 1 January 2015.

Close your eyes and imagine this. You are getting ready to head to work, you have had your shower, are getting dressed and you quickly utilise a couple of apps on your smart phone. One connects to your automated espresso machine and gets your flat white going, the second requests a car share to get you to work. You go through to the kitchen drink your flat white and five minutes later you phone beeps to say an electric driverless car is waiting outside for you.  You had selected the carpool option, so on the way to work it stops once to pick up one more person.  The trip is door to door, quicker (no waiting or congestion) and cheaper than a train ticket.  This is not as not as farfetched as you might think, and could happen before the city rail link is completed!

Electric car sharing already exists.  In Paris, Autolib' is an electric car sharing service. It has over 2,000 cars, 105,000 registered subscribers and 4,000 charging points.  It has a few problems, but the key problems that are currently associated with electric car sharing are solved when the cars become driverless and connected.  Cars will relocate themselves to where they are needed and vandalism will be sensed and reported immediately.  They will even drive themselves to the yard for a service and a clean. 

So how many driverless cars could you buy for $2.4 billion?  With no haggling, a new Nissan leaf will cost you $50,000.   A Paris Bluecar will cost you $24,000.   Let's say a driverless electric car with its automation extras and a bit of standardising and a volume discounting will cost $50,000.  Let's also assume that you also have to place about $20,000 worth of infrastructure around a car (docking stations etc).  Quoted numbers for the Autolib’ are a bit lower than this.  $2.4bn will then buy you over 34,000 cars.  Assuming you can get two people into each car at peak times, 34,000 cars could theoretically move up to 68,000 people at any one time.

A business case for the Auckland CDB Rail Link compiled by APB&B in November 2010 stated that the CBD Rail Link would provide capacity to move between 23,100 and 46,200 passengers per hour depending upon the changes to signalling.

The maths looks pretty good for the driverless cars.  More people could be moved for the investment. A driverless car sharing network would also be more versatile, more easily staged, and there would be far less heavy works disruption developing it.  As the network expanded it appears highly likely that the country would benefit from lower fossil fuel imports and less pollution.  If driverless cars became the norm, accidents could be dramatically reduced and the need for public transport infrastructure would be dramatically reduced.

The New Zealand Government is aware that this could be the way forward.  The new Transport Minister, Simon Bridges, has been quoted as saying that he believes that over time we will see driverless vehicles and that will have implications, "like for example less congestion because vehicles can travel closer together".

The prospects for driverless cars on New Zealand's roads was discussed in the Ministry of Transport's Intelligent Transport Systems Technology Action Plan. The plan suggests New Zealand could be promoted "internationally as a test-bed for new technologies".

An extensive subsidised electric driverless car network could end the need for urban trains, busses, and taxis.  And, if you live near a big city your need to own a car might diminish sooner than you think.

Paris Autolib