Should We Take My Car, or Get a Robotaxi?

usuits of stuff. Well, I think of I think of polaroids, how they were really popular there for a bit and then maybe have dropped off in everybody else's house except for mine. My kids love polaroids. Okay, So what other types of things have hit a peak? I know that we can talk about like land lines for telephones or anything like that, anything that was really popular and then

maybe sales dropped off or peak. Also makes me think of the phrase peak oil, which you may have heard of, which has to do with actually the extraction of oil from the ground. Yeah, and well, the idea is that there might not be as much demand for oil in the future, and so maybe we've hit a peak who knows, or peak for really a lot of other things, and one of those things is peak car. Um So the idea there is the concept that you know, we've reached as many cars as we're gonna get out out there

on the road. Do you think that's true. I think it could be true because I feel true. I think it might feel more true for urban nights than other people. Yeah, I think you're right. So today we're gonna be talking about a research note called peak car by our head of Mobility, Ali Azadi, who's going to stop us get into this concept and see if we are actually at

a peak for automobiles out on the road. Please note that the ANF does not provide investment or strategy advice, and you can hear a full disclaimer at the end of the show. I'm Mark Taylor and I am Dana Perkins, and this is Switched on the b n F podcast. Ali, thanks for joining us today. Thank you very much for having me. This note is titled peak car question Mark. So theoretically I should be saying peak car, which is

a bit punchy to be honest, you you're in. I see people with cliffhanger jump in because we've got a big question mark. So let me ask you, have we reached peak car? And if not, when do we reach peak car? So whenever people predict something reaching the peak, it's it's always turns out to be generally not true.

So if you remember back in the day where people were talking about peak oil supply, now we're talking about When we were writing this note, there was a little bit of a sense that auto sales are slowing down globally. So in last year China auto sales declined for the first time in twenty years. This year so far, we've seen auto sales declining in many major markets in the US, in Europe, and India, so there has been a little of a sense that maybe something fundamental is changing this

time around. So that's why we put the question mark. This is all auto sales you're seeing pretty much across the world, and this is including trucks. SUV is like, what what how do you define autos? Good questions? So here we are only talking about cars, so basically thinks that individual consumers buy to move around, but we're not talking about trucks. That you are talking about SUVs that people by, yes, an individual trucks like a flatbed truck that you would throw your stuff in, just not a

or right. Yeah, that's the reason they ask that, because people aren't buying sedans anymore. Yeah, so you're also seeing consumers taste shift. So in the US, pickup trucks are very popular. Outside of the US, you have some markets like Thailand that pickup trucks are popular, but SUVs in general everywhere are popular, although their types are quite different. So there's a shift a little bit from smaller medium basically stands two more and more SUVs. There's a variety

of reasons for that. Some argue that people feel safer in them, but some of these also carmakers like subs because they make more margins on them. So as they make more SUV models available, consumers buy the more. It sort of ends up reinforcing a nice cycle. Okay, so sales around the world are I don't know week are they week by a lot? Is it just kind of a one off for the year or is it kind of a would you say if it's more of a trend.

So this is what we were trying to address. UM and in our view, in most markets you're gonna see sales recover. There are a few markets, for example of Japan, where demographics are essentially the main culprit. You have a declining total population coupled with an aging society. Essentially fundamental demand is going down. But if you look at out our markets, say China or say US, we still expect sales to gradually recover. In China in particular, the motorization

rate is still relatively low. A lot of the decline that you're saying this series got to do with macroeconomic factors. So is this something that you would see in the longer term as a bit cyclical because we saw a big drop in what was it two eight, and we're seeing another drop now. So is this almost a decadal thing where we can expect that or is it something else to play. Sure, you're absolutely right that car sales

historically have been somewhat cyclical. They do respond to economic cycles. Now, some sometimes people make the mistakes of assuming that GDP growth rates and car sales are want to uncorrelated. The correlation between new car sales and GDP. There is a bit of a b correlation there, But what really correlate is very well, would GDP growth rates, or to be more accurate, GDP per capital growth rates, it's actually the

total distance that the fleet drives every year. The reason for that is, let's say the financial crisis is a good example. What happened in the aftermath of that is you had a lot of people losing their job, and in a country like US, a lot of people drive to go to their work. So once you've lost your job and you don't have an income, first of all, you're not going to work, but also you have to

conserve your money, so you're driving less. So historically there's a much stronger correlation between GDP per capital growth rates as well as the total distance that the fleet drives.

From that relationship, then you can start calculating, okay, depending on how the GDP does, GDP or unemployment rates, because it seems like you're trying it to steady income and than having a car, so you could make it much more granular oil and you could start breaking it apart of those factors um Having said that, from a macroeconomic perspective, the diduper capita seems to be a good factor. You

can obviously go much more sophisticated. There's other issues. It depends on your araban versus rural population, what's the composition of the economy, So you can add more and more elements of making it much more sophisticated. But what we found out in this note is actually, for a country like US, if you look at historical relationship gjper capita and the total distance driven by the fly works out

really nicely. It's actually quite beautiful. It's a constant number which then you can use and then you can rely on external forecast like what the World Bank says or for the GDP and what the U N Population Division says for population to then come out with the view of how much travel you expect to fleet to do in the future. And you're seeing global commonalities, which I think is really interesting because each of these markets on

their own seems unique. Can you just quickly outline what other countries you're looking at here and then maybe pick the one that you want to expand on. So we've tried to cover all the major markets um. So we have individual forecast for US, China, India, Japan, Korea, Germany, UK, France and Europe as a whole. Um. We also do Australia because our team in Australia is very interested in

knowing what will happen in our market. And then we also look at trying to moll forecast the rest of the world, which is a fairly big pocket category in terms of the differences. While there is commonality in the sense that from a macroeconomic perspective, you can make an assumption that in most markets the total distance driven by the fleet is correlated with geper capita, it's very different

starting point for each country. So take the US. US has one of the highest mortorization rates in the world, meaning that people have a lot of cars. In many cases, households have more than one car. In a country like the US, If you look at your fleet on the street, how much of it is owned by individuals, whereas how much of it is in taxis or right hailing companies or car sharing companies, Those numbers in the US are

heavily in favor of the privately owned vehicles. So if you look at the demand for transportations, if you look at it last year, the total distance traveled by the car fleet in the US, something around of that distance was traveled by the cars that people owned only About two point six three percent was by taxis, car sharing and right hailing. Even though right hailing you think of Uber and Left and Minia leaders your contribution the total

distance traveled by the fleet is still relatively low. You go to a country like India, where private vehicle ownership is very low, overall motorization rate is still very low. The relative contribution of taxis as well as hailed cars like Ala and again Uger operates in India, their contribution is a lot higher. In India last year we estimated off the distance traveled by the fleet, roughly one third was by the shared modes of mobility, very different right

quite extreme. And then if you go to a country like Japan, where public transit infrastructure is really good and taxes are relatively expensive and regulation prevents private right hailing, then the number contributed by these shared modes even lower, so it's below one percent. So there's a very wide geographical difference around your starting point, which really has to do with how do you get around today? And is

this alternate better than how you get around today? So in India, I suppose it is better than maybe a bus or walking or biking or even I've seen multiple people climbed on kind of a three wheeler before, and are are these vehicles? Are these shared ride services replacing that stuff or is it replacing mass transit the buses and a few subways. Very good questions. One clarification around our forecast, So this time around, we we're only trying to forecast the car sales, so we're very much focused

on the four wheeler. But you're hitting the nail in the sense that when people talk about these new shared mobility services, there's always a question around are these complementary or already is competitive with existing modes. If you look at uber and Lift and who did they disrupts today in the US, Uber and Lift primarily have disrupted taxis and public transit. Essentially in many municipalities like New York, like San Francisco, there was a decline in ridership on

public transit. So from a public policy perspective, given that they also increase congestion in those cities, this becomes a bit of an issue. But if you go to India or Southeast Asia where Grab and Gorjack operate in those markets, you had a large segment of the population being underserved by existing available options. So privately weekicle ownership is out of the reach of many segments in the population. It's

simply too expensive. Public transit is not enough, and the available taxes or even the tuk tuks and the two leaders over there, they were still not enough. There was not a good way of balancing supply and demand. What all of what ubers India operation and what GRAB and Gorja have done is essentially they have brought access to mobility to a large segment of the population in those

markets that was underserved. So they're acting as a very nice complementary solution to what existed and even enabling social mobility. So you could imagine people who wanted to get a job but in their local within their walking distance there was no job. Now that person can actually afford to travel to the further way and get a joll. So in this world of now digital right hailing, we've created some jobs. And you actually in this note have a little part where you say the holy grail for digital

hailing services is the realization of robotaxis. UM, I don't particularly want the terminator to be driving me around, but if the way I see it is you're talking about job creation and people themselves buying cars. The fleet is not owned by these right hailing services is owned by the individual who's going to own the cars if they're robotaxis. So again here we shall clarify that. Um, there's the differences in each geography. If you look at uber and

left in North America or in Europe. Um, so we were operating Europe as well as you. It's European competitors. Right now, they're not profitable and if you look at their losses, the number one cost that they have is the driver pay. So that's the part that it's still proving very challenging for them. Now. They argue that they will be able to reduce their auto cost, improve operational efficiency, and be able to try to improve their profitability by

controlling the auto cost. The jury is still out whether there's enough of other costs that they can cut while keeping the driver In markets like Europe and North America, will driver pay even the people argue driver pay is really low, it's still it's a little bit of a problem in the case of the economics of making those companies profitable. So if you replace those with autonous vehicles, depending on what the capital cost of the autonous vehicles

is which you're alluding to. You could argue that you're essentially getting rid of this opera cost that you always have. So if you think about if you are Uber and you want to scale the number of rides you're giving, you still have to pay the drivers more and more and more, Whereas if you have an autonomous vehicle that can go around twenty four hours, then you're essentially reducing

that operational cost that you're paying the drivers. It's a big capital investment, and I assume the insurance is covered by the drivers as opposed to these other companies. The big difference between being a platform and an owner of assets. Right.

While you're right that the capital cost would be high, the capital cost would be more of a one off payment, so as you increase the utilization, that doesn't linearly increase, whereas with drivers it's essentially a linear relationship that increases. So that's that's for those markets. There is this belief that if you have atonus vehicles you'll be able to do But the reason we call this, by the way, the Holy Grail was the Holy Graian was never found

even by Indiana Jones he found it. But yes, Okay, fine, it's fictional. So this has been a first vehicle sales forecast, is that correct? That's right? So in that are you giving a hint to what you think the the outcome will be for robotaxis. You know you're less optimistic, it seems I think we're realistic. So we do give a forecast in this view and in our forecast for the

next ten years. So from now until we expect that you will have less than two hunder thou robot taxes on the road, not enough to make a meaningful difference in sales. From an quantitative perspective, that may seem that this is very low, it is still meaningful from the perspective of the right hailing companies utilization exactly as well

as automakers. So if you're an automaker, particularly if you're a mass market automaker, if you look at uber and Lift in the US, the most popular car that uberan Lift drivers drive today in US is a used Prius because it's upfront cost is relatively low, it has good field economy, so the operation cost is really low. So if your Turta, you really care about that, and that's why Tota is also invest in uber a TG, so they're working together on developing autonomous vehicle technology longer term.

By twenty forty, we expect that about seven percent of the load. So again, looking at the total distance that definitely drives in twenty we expect seven percent of that to be carried by autonomus vehicles. Seven percent may sound relatively low, keep in mind, if you look at the total distance the car fullet drove last year, only five percent of that total distance was by shared mobility. So we expect that five percent in total to grow to and off that nine pcent, about one third of it

will be autonomous. Two thirds of it will still be human driven. Now you may argue why would still be human driven, and it goes back to what data you were alluding to earlier. In markets like India or Southeast Asia or Africa, or also even in developed economies, say rural United States or rural Europe, from a cost and technological perspective, it will still not We don't expect it to be feasible to rely on Thomas vehicles, So if you're in rural Texas, for example, the utilization rate is

still relatively low. Also, you have to make sure that your technology can adapt to that environment that rural Texas, to be fair, the weather is not that bad. But you go to rural Wisconsin snows a lot. So you run into a lot of practical issues. Um and that's where while we do expect the technology to improve a lot, we're still from what's known today. There's still a lot

of challenges that remain to be resolved. About halfway through peak car question mark, but you get into this place of uncertainties and it seems like there is so much to wrap your arms around in terms of what is actually influencing car ownership rates as opposed to just do I want to be on the tube today or do I want to be in my own car? And can

I find park? So there are three things you outline under these fundamental changes to actually how people and more importantly goods are moving around at the local level but really commonly around the world. Can you outline what those three areas are? So one, as you alluded earlier on, is around sort of black Swan type so financial crisis things like that, or you could put in wars and

things like that. So those definitely impact. And there's something that like unfortunately we are mortal analysts recount forecast those things. The second one and the third one, which are areas that we're going to do a lot more work on in the future. Is one is around the whole impact of e commerce. So if you think about e commerce and how you are now buying your daily necessities, you're essentially more and more eliminating they need to drive to the grocery store, or they need to go to cost

goal on the weekend or something like that. So those are areas that could fundamentally impact people's need for cars. A lot of times when people talk about one to own a car is I want to carry something. So if you elimit it that part and you don't need to carry heavy loads, then you may argue that maybe

you can rely on a bicycle. Part of the challenge today is like, if you look at the historical correlation that I mentioned that we use for forecasting the impact of e commerce on that historical correlation has not appeared yet. So will this end up in what you guys see it as see it appearing? It potentially could, So this is an area that you're we're looking at quite extensively. This and this ties to the second one, which I

mentioned briefly the bicycle one. So the question of micro mobility, So micro mobility to define it is basically stand up scooters, electric assists by bicycles which are provided on a shared platform so you don't even have to own it yourself. And the reason this is an interesting area is pick the United States. If you look at the statistics on

how cars are using the United States. If you look at the numbers from recent um the last couple years, roughly sixty percent of the average card trip is less than six miles. Within that about half of it is less than three miles. Essentially, it's people driving the car, the big suv, just going down the street to buy some stuff. Now, those are distances that if you're within less than two miles, we can easily do with a

stand up scooter. If it's less than if it's between two moles and six months, we can do with and that actually this bicycle. And we have seen a lot of money go to these shared micro mobility applications. So Baird was a bird and line where both some of the fastest unicorns ever I think burn for bird. It took it less than a year to have evaluation of

world billion dollars, which is quite remarkable. And there's this idea one of the famous um Um sort of gurus of micro mobility horse did you like to call it? The concept of unbundling the car. So essentially you're looking at how people use cars for different applications. There's all those applications that you can actually use automodes of transport.

Are you seeing this outside of major urban center, so where a car sometimes comes with more hassle than it's worth because I can't see, for example, my brother in law in Kentucky hopping on a micro mobility scooter and running to the store when he's got a car already sitting in the driveway as I see as the summer time. Yeah, so there are a lot of open questions. One is, as you're alluding to, is the rule versus urban, which is a very valid one. So again goes down around

your what are the distances that we're discussing. The other one that I would like to point out is, of course, whether so these things initially, particularly stand of scooters, took off in California. California sunny is relatively dry, but what about say winter in New York. But they also took off in Paris right where it reigns a lot. Yeah, so now we're starting so this is so thank you

for making the point. Um. There was initially some skepticism which was like, oh, these California vcs are just putting money behind something that's not going to go around the world. And what we've seen actually is now going around the world. And you have also while this some people are I think that this is a California thing. Actually shared bicycles these platforms took over China a lot earlier, and then from China and around the world, so we see it

has legs. But there the question that's still very hard to answer is how much of that demand is going to get attributed to these services. What we've already seen is that there have been two winters already since some of these new companies were launched, and they have survived those and even in winters, there was still a little bit of demand for these services. Um, so we do see that it has legs in it. It's just a question of how much of the demand will get shifted

to them. And carmakers are becoming very interested in them as well, So carmakers are looking at it. This could potentially be a competitor. Is there something we could do about it? Should be invest in it. So there's a lot of interest around this last mile and this kind of space close to your home. And there's this other category that you actually go into, which is which are autonomous shuttles that looked like they might fill the same and maybe get around some of the weather issues. My

question is though, where where are they? I've not seen any yet and are they taking off? Are they a lot of potential right now? Very good questions. So when I was talking about the roll a taxi, that was the idea of that you have an autonous vehicle which is kind of similar to your taxes today. It's on public roads, it's mixed with traffic that's still include human drivers, so they are more or less very similar to car and cars by essentially you replace a drive over there.

In the autono shuttle case, you're talking about low speed applications where you have a vehicle that's designated to specific area. The technical term dual fenced to make it fancy, so you can think of, for example, in the city area and just London like or or if you're from down Under, you would say the CBD, the and the business district basically central this dis district or a university campus, or think about airports if you have low speed geo fenced applications.

The technology is already available. There are companies like two French companies, Navya and Easy Mouths. There's US company like NA Mobility, which might have been name Mobility. Toyto's venture Arms has invested it. They're making these sort of like shuttles. They're essentially things that you could you have already seen at airports, like sometimes those shuttles that you take out

airports Togo, but now they're automated with those. What you could argue is that essentially there are form of public transit, but they're much more flexible. You don't have to worry about Okay, if you want to run these things twenty four hours, what are we going to do about the drivers? There are also a lot more flexible than say subways or autonomous model rails for them. The main questions around deployment is actually much more about local policy, or a

better world would be local politics. Let's say you want to deploy it in city like London, how would TfL's labor union respond to this because essentially you're talking about

competitive position that could have any impact on jobs. Is there a chance this is an area that sort of business, which is private technically could expand into because I can see people with their local travel card getting a little bit frustrated to have an additional fee tacked on to the end if you have So this all comes down to which type of road you're considering. So one of the really interesting deployments around these technologies is in retirement

communities in United States. So in Florida, for example, there's a retirement community called the Villages. Actually, most of retirement community in the US are called the Villages. I don't know why, but one of the biggest one has a partnership with Voyage, one of these new companies that's debluting the technology, and they're there. Most of the roads are private, so the retirement community can decide what they want to do with it, and they've already had this partnership where

they're deploying them. So yes, I agree with you that you could have if if you have large businesses that have rights over the roadways like the university campus. But in cities it becomes much more complicated. So We've had a chance to jump into a few parts of this note, and I know that we've not gotten all of the stories out of you, so people can read more if they want. My question is this seems like it's the beginning of a lot more questions that have been raised.

What is next in your research pipeline? You're absolutely right, and there's a lot of art factors we need to consider. So the first thing you're doing is to better understand how moral shifts might happen. So that question how much of the demand we'll go to Michael movies. We want

to actually look deeper into what happened historically. So one of our team members right now is writing a note looking at the UK since the nineteen fifties when initially everyone was relying on trains and like probably and then when the cars became more and more popular, how model shift happened there. So we're gonna do a historical deep slive on the UK. Then we're going to expand it to more countries and better understand how these shifts happen.

Obviously technology plays a role, but a lot of it also comes down to policy and cultural values even and based on those try to then come up with scenarios of how it may play out in the future, because we as a business to a lot of forecasts. So I guess you've got to look back before you can look forward, right, You're absolutely right, Ali, thank you very much for joining us today. Thank you very much, Dania and Mark. Bloomberg any F is a service provided by

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