News & Insights

August 17, 2020

How Permanent is COVID’s Shake-up of Urban Mobility?

Disruption to the urban mobility landscape was an almost immediate side effect of the COVID-19 public health crisis. With citizens following government directives to stay home whenever possible, the ordinarily bustling streets of cities across the world had ground to a near halt by springtime. Remote work and schooling curtailed daily commutes and social outings were outlawed, as nearly all activity except for essential services was suspended.

As new infections appeared to be on the decline through the early summer, North America and much of the world had begun to reopen its societies and economies. However, the threat (or reality, in certain regions) of an emergent second wave has emphasized the importance of finding a socially distant equilibrium for the near-term. The “new normal” has drastic implications for mobility: people are moving less and using different modes of transport.

For investors and entrepreneurs in this sector, navigating the current zeitgeist is step one. As we look to the future, the key question is which of these immediate impacts will lead to lasting changes in mobility habits.

Public Transit

The pandemic has made the most efficient means of transporting large groups of people through urban areas understandably unattractive. At the height of the lockdown, the week of April 6th, Montreal’s metro ridership had decreased by 92% and its bus ridership by 82%, despite a removal of all bus fares. As of mid-July, this figure was still down by 73% for the metro and 46% for buses. Largely due to these drops in ridership, the Société de transport de Montréal (STM) is expected to accumulate $523m in losses in 20201 and may require emergency financial assistance from the Quebec provincial government2. The largest transit agency in the United States, New York City’s MTA, forecasts a budget shortfall of US$16.2b through 20243.

Once the fear of contracting the virus subsides due to the availability of a vaccine, ridership will surely return to close to pre-COVID levels. However, many North American cities have designed transit to ferry citizens back and forth between the downtown core for work and residential areas or suburbs. If the trend towards remote work endures beyond the current paradigm, there will be a segment of riders who never return as daily transit users. Financial shortfalls from COVID, that have already required federal government intervention in the US4, may also lead to ongoing cuts in service or delays to vital improvement projects. Budget burdens may have meaningful consequences for bus fleet electrification timelines, which are already well behind those in Europe and China. Policymakers extending financial help to transit authorities should consider decarbonization goals when crafting future rounds of aid such that any public investment leads to lasting improvements.

Cycling

As citizens looked for ways to reduce their reliance on public transit and city governments looked for other ways to accommodate socially distant mobility, the cycling industry has been vitalized. The implementation of dedicated cycling infrastructure has proven to be one of the best ways to increase uptake5. Montreal has created an extra 327 km of bike paths and pedestrian lanes as part of its “safe active transportation circuit”6. While there does not appear to be much publicly available data tracking cycling ridership in North America, piecemeal evidence from various sources suggests a boom for bikes and e-bikes. One trail in Philadelphia that counts cyclists saw a 471% rise in March7; an Arizona-based e-bike retailer Lectrice Bikes reported a 140% sales jump8, and MKB’s experience with its portfolio company the pan-North American mobile bike shop velofix is that demand for their adapted no-contact delivery and servicing is higher than ever.  The trend towards growth in cycling has been in place for several years now, due to factors related to health, environment, city congestion and more. COVID seems to have added extra incentive in the immediate term for citizens to include cycling in their mobility or exercise habits. Given the seasonal nature of cycling, this is bound to decrease again as we approach the winter months, but it would be unsurprising to see continued proliferation in the post-COVID world.

Passenger Vehicles

At the end of March, global road transportation activity had decreased by 50% from the 2019 average5. Although, according to the anonymized mobility data that Apple has made available, transit trips appear to have fallen more significantly than personal vehicle trips9. This may imply that certain trips that may otherwise have occurred on public transit have been shifted towards personal vehicle trips. These trips appeared to be predominantly in vehicles that individuals already owned, as new passenger car sales decreased by 83% in April and 57% in March10. The height of the lockdown unsurprisingly saw significant drops across the various forms of road transport. In April, Uber reported ridership decreases as substantial as 80% in some cities, and Lyft had seen business shrink by 75%11. Car sharing, which before the pandemic was used by more Canadians than ever12, seemed likely to suffer a similar to fate to that of the ride-hailing services. A drop in ridership was indeed the case with the lockdown in full effect but, based on MKB’s experience with portfolio company Communauto, shared vehicles have been a preferred method to public transit and have not fared as badly as initially feared.

There are likely to be lingering impacts of both the behavioral changes and the economic downturn brought on by COVID-19. Car purchases dropped significantly as, like all other non-essential services, car dealerships were shuttered. Sales have begun to regain steam but remain below pre-COVID levels, and they may be slow to recover due to the economy’s shrinkage and the population’s reduced disposable income. This is likely to slow the overall uptake of electric vehicles (EVs) in the near-term; however, it is unlikely to decrease the percentage that EV sales represent out of total vehicle sales. This figure was about 3% in Canada in 2019 and had spiked up to almost 6% in March 202013. Car sharing saw detrimental impacts during the lockdown as well, but the sector is likely to have a strong rebound as general mobility increases and many new users who changed out trips on public transit for car share trips continue their newly acquired memberships. Ride hailing services are also likely to resume the growth that they had experienced over the last several years once mobility returns.

Flights

Although air travel is not part of urban mobility per se, along with public transit, commercial aviation has been among the modes of transportation most adversely affected by COVID-19. Commercial flight activity had decreased by 75% below 2019 levels by mid-April 20205. It also may be among the sectors that sees more permanence to the impacts. Flight activity will almost certainly return to levels higher than those seen today. However, the pandemic may have accelerated the movement away from air travel for business, enabled by the proliferation of video conferencing14. Leisure air travel may see a similar deceleration, as the social trend known as flygskam permeates in Europe and elsewhere. This translates from Swedish as “flight shame” and refers to a movement to avoid air travel because of its carbon intensity15. These remain relatively nascent trends but have the capacity to take greater root in societal norms over time.

What’s next?

If there is anything that 2020 has reminded the world, it is that the answer to that question is: no one knows. However, we can hypothesize that the mobility space is likely to continue in its current distorted form until virus fears are assuaged by a vaccine. The scientific community’s best estimate is that this reality remains several months away, at best. Once society is no longer discouraged from being mobile, we can begin to take note of the long-term consequences. Public transit is surely not doomed to see the current reduced levels of ridership in the long term; the growth of cycling and decreased air travel may have seen temporary spikes but could be signs of tendencies that are here to stay. The most likely outcome seems to be both a reversion towards the pre-COVID mean and an acceleration of trends that had already been in place.

Author: Saul Muskin, Analyst @ MacKinnon, Bennett & Company Inc.

Image: Jamshed Khedri via Unsplash

Sources:

MobilityInsights

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