Equity, Diversity and Inclusion

3 ways countries can invest to build next-generation mobility

A commuter with a dog stands on a Berlin transport company BVG subway platform at Alexanderplatz station during a nationwide strike called by the German trade union Verdi over a wage dispute, in Berlin, Germany, March 27, 2023. REUTERS/Annegret Hilse REFILE - QUALITY REPEAT     TPX IMAGES OF THE DAY mobility

How can advanced nations overcome political, financial and infrastructure challenges to improve mobility? Image: REUTERS/Annegret Hilse

Gilles Roucolle
Managing Partner, Europe, Oliver Wyman, Author of Transformations in Mobility
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Mobility

This article is part of: Centre for Urban Transformation

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  • New infrastructure projects, which are needed to reduce emissions and improve mobility, can be costly and politically challenging to implement.
  • Legacy structures – from buildings to water pipes – reduce the space available for new projects, while digital technologies have disrupted demand.
  • However, new and improved infrastructure is possible through electrification, shared assets, governments working in coalition and digital innovation in mobility.

In an ideal world, advanced nations would start massive new infrastructure projects rapidly to improve mobility, speed the transport of goods and reduce greenhouse emissions in cities teeming with people.

But in recent years, giant projects such as high-speed rail and motorway networks have become much harder to implement. Politically, it is increasingly difficult in democracies to achieve the consensus to execute expensive, multi-decade projects.

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Moreover, legacy structures – from buildings to water pipes – reduce the space available for new projects. At the same time, digital technologies fragment demand and reduce captive consumers and travellers by providing access to low-cost travel, coordinating shared services and helping navigate mass-transit options by suggesting modes for different legs of a trip based on a traveller’s preferences.

To reach mobility goals in the coming decades, business and government leaders need to coordinate a complex range of actors and services. Global mobility will require $2.5 trillion in investments by 2040, double the level of 2017. The investment mix is already changing, and a big chunk is likely to go to a combination of digitally revitalized, traditional and new mobility services, such as low-cost high-speed rail and car charging. This is according to recent research from the Oliver Wyman Forum, along with interviews with 30 global industry executives and experts.

The investment mix in mobility is already changing
The investment mix in mobility is already changing Image: Oliver Wyman

For maximum impact on mobility, the giant incumbents and growing ranks of mobility start-ups must work in coalitions of infrastructure managers, operators, governments, vehicle manufacturers and digital enablers. The successful mobility models of the future will share three common elements:

1. Electrification and shared assets

Mobility uses a huge amount of resources and significantly contributes to climate change. Reducing these burdens presents a mammoth challenge. Transportation represents around a fifth of the world’s greenhouse gas emissions – the second largest source after the energy sector.

Cars are now rapidly electrifying. Micro-mobility, which entails various scooters and bikes, is almost all electric or human-powered, as is a large share of rail transportation.

Cars, planes, trains: where do CO2 emissions from transport come from?
Cars, planes, trains: where do CO2 emissions from transport come from? Image: Our World in Data

Air travel is another story, with the commercialization of sustainable aviation fuels (SAF) still some way off. This gap could lead to a shift toward other modes. For example, France has banned domestic flights that can be covered by train in 2.5 hours or less. Carbon regulations could follow in some jurisdictions, compromising air travel’s price advantage over rail in many markets.

Mobility also takes up space – another limited resource. As cities grow, they need to transport more people and goods, but there is not enough room to continuously expand tracks and roads. Moreover, demands for more space for pedestrians and active mobility, such as bikes, are rising. Existing routes and vehicles must transport more people and goods and cater to various services.

One way to do this is through greater sharing of assets. Many rail operators already share track – especially in the European Union, where infrastructure and train service operators are separate. Road vehicles are now increasingly being shared. A typical privately owned car is immobile around 95% of the time (one reason cities have so much street parking). Ride-hailing and car-sharing services allow people to get around by car but use fewer vehicles, freeing up city space. The former is already well established, and other services, such as car-pooling or borrowing from a dedicated fleet, have become increasingly attractive to young people and city dwellers. The available space could be used for other purposes, such as active mobility, tramlines and bus lanes.

2. Digitally activated mobility services

Travellers’ behaviour used to be dictated by the options available, which were often just cars or limited mass transit. Today, the end customer comes first. Digital innovators have reversed the value chain, and app-based services let customers design journey packages how travel agents used to, using a choice of routes, service operators and modes.

Another fruit of recent innovation is the big growth forecast for new, digitally activated mobility services, such as smart parking, battery recharging and vehicle sharing. A selection of 13 such services will grow at an average of almost 10% a year over the current decade to reach $660 billion in 2030, according to a study by the Oliver Wyman Forum and the Institute of Transportation Studies (ITS) at the University of California, Berkeley. That compares with growth of around 5% for the overall mobility sector.

Traditional modes are also innovating through digital technology. In 2016, after the flagship TGV high-speed rail service of France’s SNCF came under pressure from low-cost flights and buses, the company launched a successful low-cost and high-speed brand, Ouigo (translating to “Yes, go”).

Booking and ticketing are online only, removing the need for sales desks, call centres and travel agents. The cost of selling a ticket fell from more than €10 to less than €4. Digital monitoring of train components enabled predictive maintenance, which reduced costs and sharply increased the efficient use of rolling stock.

3. Infrastructure developed through industry-government coalitions

As well as software, new and digitized services need facilities to charge and park vehicles, preferably at intermodal connections linking to rail and bus options. Mass transit needs more dedicated bus lanes and tram tracks – perhaps one day incorporating induction charging systems – and it will increasingly be integrated with office and residential towers, as it is in many leading Asian cities. On highways, smart sensors could expedite the introduction of vehicle automation.

But equipping cities for next-generation mobility requires decisions to prioritize certain forms of mobility. How much should be spent on public transport? Should space for cars be reallocated to bicycles and micro-mobility? And, in the future, might drones and flying electric taxis be allowed to crisscross city skies?

How mobility share by mode of transport is changing
How mobility share by mode of transport is changing Image: Oliver Wyman

To succeed, service operators and infrastructure builders must work with governments in coalitions or face the risk of facing barriers. E-scooters, for example, seem like a good, resource-light way to get around, but if they are not appropriately managed, free-floating fleets could impede pedestrian walkways. In the case of Paris, a referendum in April saw a large majority of voters calling for a ban on rental electric scooters.

As always, mobility is more than just a technology challenge; it is an eminently political one. However, new and improved infrastructure is possible through electrification, shared assets, governments working in coalition and digital innovation in mobility.

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