If you ask the average person about transportation services, they’ll likely tell you that transportation — especially on the private side (think cars) — is a profitable, high-margin business that offers lucrative opportunities through innovation. Or, in the case of public transport, it seems to make money because it takes fares that never seem to be reinvested in improving transport infrastructure.
The sad truth
The sad truth that obscures our ability to solve global transportation issues, including ride-sharing, e-modalities and car-sharing, is that it’s not a high-margin industry. From low margins in automotive manufacturing to limited markets with high margins for ridesharing opportunities, it has become clear that transportation is a tough market to meet people’s needs affordably.
Furthermore, good business models and strong regulatory frameworks — although they are a big part of the equation — are not enough to meet society’s mobility needs. While they may work profitably on occasion, they fall short when it comes to sustainability or inclusiveness. This is because they are designed for the individual rather than society as a whole, ensuring the profitability of a single-vehicle line or a single-service market.
Bottom Line: All of us—public and private businesses, and citizens—must understand that repairing transportation cannot be done overnight. It will take public and private partnership, compromise and creativity. But, more importantly, it will require reliable funding.
The road to today’s transportation challenges
If you trace the roots of transportation, it started as a profitable business as it evolved from individuals walking to services provided by others. Transportation was seen as a way to get from point A to point B, which quickly became a tool for economic development. Whether it’s farmers bringing goods to market or taxi drivers ferrying people around a city, transportation has helped build metropolises.
Along with the impetus for private and commercial transport, governments have become involved given transport’s links to real estate and infrastructure, often areas of local government jurisdiction. As cities became expensive, people moved to the suburbs; but in many cases these suburbs were developed on the assumption that people would meet their own transport needs via private vehicle rather than shared public or private transport. As people continued to disperse, dependency on transport grew, as did the obligation of transport to connect people, goods and services.
Enter public service – and the start of what has become a tension between public and private, between politics and structure, that still plagues the industry today. Public entities take responsibility for public transport while being forced to keep costs low, and private companies continue to provide a better experience for those who can afford it while clogging roads in the process. As this tension has reached its boiling point, it is clear that transportation patterns are largely unsustainable at the rate cities and suburbs are growing, and the transportation industry is also a major contributor to our carbon footprint. spiraling and accelerating climate change.
Today, under increased pressure, the global transport sector is “catching up” and failing to meet sustainability, inclusiveness and equity goals fast enough. All that to say: we have yet to crack the code on the right terms for the right use cases in a way that meets the plethora of expectations we demand from the transportation industry, including fiscal, operational, equity and environmental objectives.
There are many examples of attempts to achieve these goals for the transportation industry, but for a variety of reasons almost all have tried and failed or found longevity difficult to achieve, including:
Public transport is supposed to be built on fixed fares. Pricing public transit as a basic need has resulted in low prices and thin margins. Raising prices risks overpricing those who need public transport the most. However, as the cost of fuel increases, the costs of public transport also increase, although it is possible that the increase in fuel contribute to higher attendance.
An increase leading to increased emissions, traffic jams and strained infrastructure. As public transport did not meet the needs and the prices of vehicles fell, people bought their own car. The development of e-commerce has required more and more delivery vehicles. All of this has created more emissions, more congestion and more pressure on our roads.
Electrification is expensive. The shift to electric vehicles is one piece of the smart mobility puzzle, but cost continues to be a barrier to entry for many public and private entities. Just take the recent US Post Service decision to buy primarily gas-powered delivery trucks.
Mobility as a service (Maas) is often not profitable.More recently, market entry and exit of technologically innovative MaaS solutions has been largely unprofitable due to a lack of broader financial strategy and the ability to create a cohesive transportation experience from a variety of service providers.
Reinventing transport and its financing
Many of the world’s most progressive governments and innovative companies have sought to solve the transportation challenge using a mix of creative policies and operational models. Their objective? Prove that public transport companies can both fulfill public service obligations and make a profit, and stay in business.
These models are unsustainable because government funding cannot meet the demand for transportation that meets public expectations. These expectations are now high based on ridesharing experiences and sustainability goals, which are becoming increasingly necessary globally. At the same time, we recognize government dollars must be used to build, support and improve essential transport services.
Reinventing transport is critically important in the race against the climate and equity crises – ensuring people can get where they need to go in a sustainable way. If we can agree on this, we can explore meaningful ways to invest government money to support the reinvented transformation of our transportation systems. If we reimagine transport, more people will have access to this fundamental right – freedom of movement – and we can finally consider MaaS, multimodality, electrification and autonomous vehicles as viable options to reduce our carbon footprint.
Reliable government funding is the key to unlocking the future of mobility.
Our goals are ambitious, but they are within reach. Let’s reset the transport framework today to create a just and sustainable future.