A Cultural Shift in Attitudes to Transportation - The Demise of the Auto and an Emerging View of Transportation For Cities

During a recent lecture I attended, the speaker noted that change is only possible when conditions are "right" i.e. that it can occur only when general sentiment is at the point where the problem is recognized and there is support for a general end point.  

We may be nearing that point of change with respect to transportation in North America.  

• the "millennial generation" (the largest new cohort born in recent times between 1983 and 2000) is less inclined to own and use motor vehicles - this marks a major change in North American society - further, boomers are driving less 
• North American society is becoming more urbanized with the result that people are paying more attention to intra-urban transportation.  

Depressed economic conditions aside, this is reflected in the reduced propensity of North Americans to drive automobiles.

Clearly, when we adjust for population growth, the Miles-Driven metric takes on a much darker look. The nominal 39-month dip that began in May 1979 grows to 61 months, slightly more than five years. The trough was a 6% decline from the previous peak.

The population-adjusted all-time high dates from June 2005. That's 96 months — eight years ago. The latest data is 8.97% below the 2005 peak, fractionally above the the 9.02% post-Financial Crisis low set in June. Our adjusted miles driven based on the 16-and-older age cohort is about where we were as a nation in January of 1995.  vehicle miles driven

The report, A New Direction - Our Changing Relationship with Driving and Implications for America's Future, explores this trend in more depth.  The changes are huge.  

The report starts with the observation that "the driving boom is over" and explores various implications of this development:

• traffic congestion appears to be lessening (try telling that to motorists who use cars in Toronto, one of the most congested cities in North America and whose intellectually challenged Mayor is opaque to the transportation needs of the average Torontonian ... would you believe it, this former one-term university bencher used to take time off from Council meetings and city business to coach a high school football team ... that is, until the school "expelled" him for making unguarded remarks about the situation and inclinations of the student body ... but I digress);
• America is less dependent on oil; and,
• the "shift" which appears to be led by the millennial generation and by aging boomers may signify a turning point and an opportunity for real change.

These trends are reflected in reports on transportation trends from some of the more populous states and provinces in North America. For example, see Florida Transportation Trends and Conditions

In the face of these trends, the highway lobby has been very effective in securing funding for road construction and maintenance, especially in vote rich rural constituencies where employment rates are generally lower than in urban areas. This may change.  There is a growing awareness that investment in more highways is not needed in many areas and further, that revenue from gas taxes does not begin to recoup the direct costs of government investment in highway infrastructure:

There remains a common misconception that “roads pay for themselves”—that is, that revenues from the gasoline tax are sufficient to cover the costs of highways and driving. By 2010, revenue brought in from gas taxes and other user fees (not all of which is dedicated to highways) equaled only 62 percent of highway spending by all levels of government.108 In other words, for every two dollars of highway improvements paid for by drivers, general taxpayers chipped in a third dollar—a subsidy of $73 billion in 2010 alone. A New Direction

Revenues from road tolls and taxes on fuel sales are projected to decline, further exacerbating the gulf between expenditures and incoming revenue.  

Lifestyles are changing.  My experience with the new urban professionals is that they prefer to live in downtown areas with walkable neighbourhoods where the ownership of a cool one-gear urban bike is more prestigious than a luxury automobile.  Taking different perspective, wider income disparities are reflected in a demand for lower cost public transit for a significant portion of the population - this as one ingredient of a strategy to improve employment prospects through greater accessibility to workplaces.  

In Canada, governments have been slow to recognize this fundamental change.  The federal government has been singularly negligent in addressing the needs of cities.  A content review of Hansard (the record of Parliamentary debate) reveals hardly any mention of urban issues.  Instead, we are treated to a plethora of "feel good" pork barrel schemes designed to deliver votes in rural ridings and champagne-level treatment for roads to nowhere.  

As further confirmation, nowhere in a recent report from Transport Canada are urban transportation issues mentioned - this in a glaring repudiation of the fact that there are more bums on seats in cities than in rural areas and where federal investment would have far more impact in economic terms. Outlook, Trends and Future Issues

So ... what are the drivers (pardon the pun) which could lead to a change in attitude on the part of decision makers?

• at a national level, a more organized voice for change on the part of cities and advocacy for more city-friendly transportation strategies and funding programs;
• at a city level, more pressure on the part of residents for a more pedestrian and bike friendly infrastructure and transit which reduces commuting times and provides a more equal opportunity for under-serviced segments of the population (i.e. better travel to work for poor people)
• at a city level, pressure to improve safety for pedestrians and cyclists as the death and injury toll from collisions with auto continues to increase - sometimes alarmingly (as situations such as the "dooring" (collision) of cyclists with opening doors of automobiles are not reported)
• at an industry level where boards of trade and other business organizations are concerned about the implications of poorly organized transportation systems on the bottom lines of their members 
• at the level of think tanks and academic institutions which are creating a greater awareness of transportation issues by providing fodder for the information hungry media and also in training and exciting young minds

This is a complex issue - something which cannot be covered in several posts.  As a result, I will explore this in more detail in future postings.  

A key observation: this is a slow trend - something which will gather speed over the next 20 years.  Alert investors should have the insight to ferret out themes for investment and the patience to recognize investment-worthy opportunities.  At first blush, I have identified a few for your consideration.  

Some Potential Investment Opportunities

1. Automated User-Friendly Fare Collection - traditional forms of fare collection such as tickets are inconvenient and provide little in the way of in-depth, up-to-date information about the travel habits of transit users.  There are several opportunities in this area as cities start to upgrade their transportation systems: Users Prepared to Pay More for High Tech. Collection systems could also be improved for other facilities such as toll roads, parking, ferries and the like. 
2. Information for Travellers - while there are applications which provide information on traffic conditions, the range of services could be expanded considerably.  For example, consider the following scenario: incoming air traveler gets estimate of arrival time and time of connections with airport transportation services (makes on-line arrangements if required) and gets estimated ETA for hotel accommodation and makes reservations for meals or other services)
3. Hard Infrastructure - engineering and construction services (including maintenance) - these are less interesting to me with the possible exception of maintenance services and technologies

There are many other opportunities which will come to light on further reading.  (I'll leave it up to you to do some sleuthing and may report on some of my findings in later postings.)  In my search, I will look for well-managed companies with products that meet existing needs (revenue flow established) and which have business models which can be scaled up without substantial follow-on investments.  I will not spend time in looking at large industrial concerns which build costly items such as rail cars and the like as the field is rife with competition and uncertainty.  Instead, I'll look for small and medium sized companies with great products which satisfy growing market niches.  This search will take a year or two.