Mobility-on-demand pricing versus private vehicle TCO: how cost structures hinder the dethroning of the car

• Published in: Transportation (Dordrecht) 2023-04, Vol.50 (2), p.1-25
• Main Authors: Kuhnimhof, Tobias, Eisenmann, Christine
• Format: Article
• Language: English
• Subjects: Automobiles; Competitiveness; Cost analysis; Cost distribution; Cost of motoring; Costs; Economic Geography; Economics; Economics and Finance; Engineering Economics; Households; Innovation/Technology Management; Logistics; Marketing; Mobility; Mobility on demand; Modal choice; Modal shift; Organization; Price levels; Prices; Private car TCO; Regional/Spatial Science; Skewed distributions; Travel modes; Vehicle automation
• ISSN: 1572-9435; 0049-4488; 1572-9435
• DOI: 10.1007/s11116-021-10258-5

This study uses a unique dataset on the cost of motoring in Germany to analyse cost competitiveness of emerging mobility-on-demand (MOD) services. Previous studies have focused on comparing current and projected MOD prices with the average cost of private motoring. This study quantifies which proportion of private car travel would actually turn out to be costlier than MOD given that MOD costs drop below certain levels relative to the cost of private motoring. In this context, not the average but the distribution of the costs of motoring are the key issue. These costs are strongly skewed across the cars in private households when including new and old vehicles: a large proportion of private car kilometres are driven at relatively low cost. The study uses simplified scenario settings with MOD price levels ranging from 0.1 €/km to 1.5 €/km to make predictions of hypothetical modal shifts under the assumption that car user switch to the most economic mode of travel. These modal shifts serve as an indicator of MOD cost competitiveness. The results indicate that MOD prices would have to drop to 0.5 €/km or lower to have a notable impact on use of the private car if cost was the key mode choice criterion. Only if MOD prices drop down to a level of about 0.3 €/km—quite possibly a lower boundary for automated MOD—MOD-enabled mobility packages would be the less costly alternative to the private car for a substantial proportion of mileage. However, even at that MOD price level, the private car would still be the most economic option for the majority of today's car user kilometres. Our findings illustrate that the skewed distribution of the cost of owning and running private cars—where many of those who drive much drive inexpensively—substantially dampens the disruptive potential of MOD. While we use data from Germany to illustrate this, many of our findings are more widely applicable.