Don’t Be Misled by the AAA Foundation’s Ride-Hailing Study

There’s no doubt in my mind that shared mobility is in the fleet industry’s future

By Mark Boada, Executive Editor

It’s a fact that headlines often have a greater effect on public attitudes than the details of the story itself.  It’s bad enough when the headline makes people think things are better than they actually are, but it can be detrimental to the common good when it casts a negative light on a positive trend.

It’s because of the latter that I have concerns over the recent press release from the AAA Foundation for Traffic Safety, which was about one of the new trends in the world of transportation: ride-hailing, which is a sub-trend in the broader development of the sharing economy.  Here’s the headline and the first paragraph of the AAA Foundation release:

AAA: Ride-Hailing Twice the Cost of Car Ownership

ORLANDO, Fla. (Aug. 21, 2018) – Ride-hailing services are a popular and convenient transportation option, but a new AAA analysis shows they are not a cost-effective replacement for vehicle ownership. According to the AAA Foundation for Traffic Safety, the average driver in an urban area – the only setting in which using these services are a practical full-time transportation option – drives 10,841 miles per year. While urban drivers travel fewer miles than those living in smaller towns or rural areas, relying on ride-hailing services as a primary mode of transportation would cost $20,118 annually. This equates to more than twice the cost of owning a personal vehicle, even when factoring in the expense of fuel, insurance, parking and the vehicle itself.

Now, don’t get me wrong. I’m not arguing with the accuracy of the general finding itself.  In fact, I’m inclined to believe the study, at its high level of generality is correct. In spite of that, though, I have three problems with it, all of which suggest that the headline is misleading, that there are many people for whom it may make financial sense to sell their cars and  hail a Lyft or Uber when they need to go somewhere.  And that makes me wonder if the headline raises skepticism in the minds of fleet managers that they have no reason ever to take the sharing economy into account when they conceive of their fleets’ future.

The first problem I have is that the release doesn’t define what an “urban area” is.  Is it the area contained within the boundaries of a major inner city, or that defined by one of the U.S. Census Bureau’s Metropolitan Statistical Areas?  I ask because the average driver who lives in one of New York City’s five boroughs, for example, is likely to be a lot different from the average driver who lives in the semi-rural, ex-urban counties of Monmouth or Morris in New Jersey, or Suffolk or Putnam in New York.   I suspect that someone who lives in Manhattan drives many fewer miles per year than a commuter who drives to work from his or her half-acre tract home in leafy Freehold Township, N.J. or Mahopac, N.Y.

My second problem is that there are many thousands of drivers on either side of the “average,” possibly even in five boroughs of New York, who drive far fewer miles than the 10,841 the AAA study’s average driver.

When I take both of these problems together, I can easily imagine many drivers for whom ride-hailing may be cheaper than owning a car. But I don’t even have to imagine them, because you can find their stories all over the print and electronic media.

Back in May, 2017, Reuters led its article about ride hailing with the story of Wally Nowinski, who moved to New York City from Michigan after graduating from college. Two years later, Nowinski sold his car and turned to ride-hailing, car-sharing and bike-sharing to get around.

“My mom didn’t think I could do it,” the wire service quoted Nowinski. “She thought I would buy a new car in six months.”  But he pointed out that that was a year before the Reuters interview, and since that time his car budget of $820 per month had fallen to $250 for car-sharing and ride services.

Nowinski’s story illustrates my third problem with the AAA release:  I believe that few people who sell their cars are likely to rely exclusive on ride-hailing for their transportation needs. Instead, I believe they’re likely to use ride-hailing as one alternative, along with public transit, rentals and car- and bicycle-sharing.

I readily admit that the number of car owners ready to forsake their wheels for shared forms of mobility is small.  A Reuters poll conducted last year that only about 9 percent of the people it surveyed who sold their cars forsake ownership entirely in favor of shared mobility.  But in case fleet managers dwell on that number, they should take note that many major car makers, including Ford and GM in the U.S., are investing in a number of ways that people can use their cars without buying or leasing them.   There’s no doubt in my mind that shared mobility is in the fleet industry’s future.

To its credit, the AAA release admitted that for many people, ride-hailing may indeed be cheaper than owning a car. It quoted John Nielsen, AAA’s managing director of automotive engineering and repair, as saying, “For those who travel a very limited number of miles annually, or have mobility issues that prevent them from driving a personal vehicle, ride-hailing can be a viable and important option.”  But that wasn’t in or anywhere near the headline.

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