Macro Factors Affecting Transportation Focus at Fuels Institute Annual Meeting

05.26.17 | Blog | By:

Earlier this week, I attended and spoke at the Fuels Institute’s annual meeting in Denver. The theme for this year’s meeting focused on macro factors affecting the transportation market, including a deep dive into autonomous mobility, electric vehicles and urbanization. Auto Alliance President Mitch Bainwol kicked off the meeting by discussing in depth (in 120 slides…yes, 120 slides…) U.S. consumers’ attitudes about auto environment and safety issues, including the foregoing topics and in addition, fuel economy. I couldn’t put it more succinctly than Fuels Institute Executive Director John Eichberger did in summing up the key points of the presentation:

  • “Even if CAFE standards are relaxed, the auto industry is global and the pursuit of reduced emissions and improved efficiency will continue in order to comply with global standards and consumer interests.
  • [Internal combustion engine] (ICE) vehicles are 25% more efficient today than several years ago. When combined with sustained lower prices, this has made it difficult for consumers to justify an additional investment for an alternative vehicle.
  • From consumer surveys, it is clear: as much as consumers say they want improved fuel efficiency, they are simply not willing to pay for it.
  • Autonomous technology can yield significant advantages in terms of safety, but most consumers remain unconvinced. Younger drivers (sub-40 years) are much more inclined to adopt this technology.”

Ryan Robinson with Deloitte shared their survey results and analysis of global consumer opinions, which found that consumers most value safety features in their vehicles. “Safety rules in terms of technologies in vehicles” and that attitude is at odds with consumer attitudes on autonomous vehicles (AVs). One of the advantages of AVs touted in the media and by companies involved in the space is safety. But consumers globally do not see it that way, as the figure below shows.

E.J. Klock-McCook with the Rocky Mountain Institute noted that EV battery prices are dropping, range is improving and charging infrastructure is growing. The cost advantages for EVs are going to outpace the ICE in the next few years. E.J. presented the following example:

  • “The average US car is ~23mpg
  • This car costs 9 cents/mile at $2/gal for gasoline
  • Today’s EVs require ~30 kWh/100 miles
  • This car costs 3.6 cents/mile at $0.12/kWh
  • Gasoline would have to be 80 cents per gallon to compete”

He also noted that compared with the average car today, individually owned AVs will be 40% more expensive while fleet AVs will be 45-67% less expensive.  He projected by personally owned vehicles and shared mobility service vehicles will split the market 50/50 around 2035.

And then there was my panel on urbanization. Sharing the stage with me was Jeff Wood, an urban planning specialist who runs his own consultancy, The Overhead Wire.  Jeff discussed comprehensive planning strategies that would take advantage of existing city structures and employ diverse mobility options to reduce the impact of transportation. I started off my part of the discussion with the following quote and asked the audience to guess which U.S. city it came from:

“Until you make it so painful that people want to come out of their cars, they’re not going to come out of their cars. We’re going to make them suffer first, and then we’re going to figure out ways to move them after that because they’re going to scream at us to help them move.” [See post, Nov. 8, 2016]

I asked the audience to guess the city, which was kind of a fun way to start the session. Folks threw out New York, Los Angeles, Chicago, Washington, DC, Houston, Portland and other cities. But no, that wasn’t it. It came from Miami, as readers may recall. My point was that Miami isn’t even the largest city in the U.S. (It’s the 8th largest, if you’re measuring by metropolitan statistical area, and the UN ranks it as the 58th largest city in the world.) Yet, it is struggling with traffic congestion (after many attempts to mitigate it), air pollution and is, arguably, a “ground zero” U.S. city for climate change impact.

City managers’ frustrations are building in the U.S. and globally, and their responses could really impact fuel and vehicle demand. This is something the oil and auto industries need to be paying attention to, and figuring out how best to respond and engage. It is not some far-fetched or far-reaching issue, and as far as I know, I might be one of the first ones in industry to identify the trend. So, what can cities do?  This is something I continue to investigate for Future Fuels Outlook clients (and clients, you can look for some additional reports on this in the next month or so), but the short answer is: a lot.

There is a larger theme at play here that I didn’t go much into detail about during the panel, but there does seem to be a movement or shift occurring (or trying to occur) from federal/national and state/provincial authority to city authority, especially when it comes to climate change mitigation. And that makes sense: with 70% of us living in urban areas by the year 2030, cities are going to have to figure out how to make that work sustainably their citizens based on their unique circumstances. Taking a greater stand on congestion, air pollution and climate change flows out of that. There’s another dimension to it as well that I allude to in the graphic above. Some cities see taking a stronger stance on cars in cities as a way to “resist” the climate-related action (or inaction) from the Trump Administration.

 

Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.