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The Next Economy
AVs, Shared Mobility, IoT to Shape Future Urban Mobility, Says New McKinsey Report

Urban mobility is undergoing a dramatic transformation with the emergence of new technology and transportation services. The pace and extent of this transformation will vary from city to city and depends largely on factors such as density, household income, the state of existing infrastructure, pollution and congestion levels, as well as local governance capabilities.

Urban mobility is undergoing a dramatic transformation with the emergence of new technology and transportation services. The pace and extent of this transformation will vary from city to city and depends largely on factors such as density, household income, the state of existing infrastructure, pollution and congestion levels, as well as local governance capabilities. To help urban planners anticipate the future mobility scenario with the most societal benefits, McKinsey has published a new report, providing a pathway for municipal officials and other urban stakeholders can help their cities navigate toward positive outcomes.

The Future(s) of Mobility: How Cities Can Benefit explores scenarios for integrated mobility for three different types of cities: dense cities in developed economies, dense cities in emerging economies and sprawling metropolitan areas in developed economies. By analyzing existing conditions and modeling how mobility trends could play out in each scenario, planners can identify which trends are likely to advance quickly and how they will impact traffic, safety and the environment.

According to McKinsey, the following trends are likely to have the biggest impact on the development of integrated mobility in cities:

  • Shared Mobility: Mobility services such as Uber, Daimler’s Moovel and Lyft have already played a significant role in the shifting urban mobility landscape and will continue to do so, competing with public transit as well as private vehicle ownership.
  • Autonomous Driving: Promising to improve road safety, reduce the cost of transportation and expand access to mobility, more and more companies are being drawn to the appeal of self-driving vehicles. Widespread adoption of the technology has the potential to increase trips, while competing with public transit.
  • Vehicle Electrification: Electric vehicle sales exploded between 2011 and 2015, ballooning to 450,000 from 50,000 over the four-year period thanks to subsidies, falling battery costs, fuel-economy regulations and product improvements. With battery costs expected to drop even further, below $100 per kilowatt-hour, EVs could soon achieve cost competitiveness with conventional vehicles.
  • Internet of Things: The Smart Cities movement is opening up new opportunities for urban infrastructure and mobility. Software systems can facilitate trip planning and guide AVs based on real-time conditions, while also helping planners add capacity and improve reliability to help mass transit remain competitive.
  • Infrastructure: The percentage of the world’s population living in cities will increase by more than two-thirds by 2050, putting new pressure and demand on transportation infrastructure. Upgrades that favor public transit, ride-sharing and bicycling could reinforce a shift away from car ownership.
  • Decentralization of Energy Systems: The rise of small-scale solar and personal energy systems could accelerate uptake of EVs by making electricity cheaper, cleaner and more reliable. In some areas, it is already less expensive to power a vehicle with electricity than traditional fuel. Decentralization could also reduce demand on the grid, lowering electricity prices at peak times and freeing up more capacity of vehicle charging.

Under the dense, developing cities scenario, what McKinsey calls a ‘Clean and Share’ model is expected to emerge. Under this model, infrastructure improvements will have the most significant impact on integrated mobility, helping alleviate traffic congestion and providing efficient mobility services that can meet the demands of rapid population growth. High-capacity public transport and shared mobility services are likely to provide the most effective at satisfying mobility needs, with shared light vehicles accounting for approximately one third of vehicle miles traveled in an average-sized city by 2030. Advances in decentralized renewable power generation, in addition to mounting concerns about pollution, are also expected to drive a shift towards electric vehicles. McKinsey projects that 40 percent of vehicles in developing, dense cities will be electric by 2030.

The report suggests that cities such as Delhi, Istanbul and Mumbai, which fall into the category of dense, developing cities, are well-poised to make early transitions to integrated mobility based on factors such as above-average GDP per capita, population size, track record of effectively implementing public projects and urgent pollution and congestion problems.

These cities stand to benefit significantly from mobility advances, with McKinsey estimating gains of $600 million in annual societal benefits by 2030. Between the period of 2015 to 2030, these benefits could add up to $3 billion and $4 billion, or $2,200 to $2,800 per resident.

High-income, low density cities such as the sprawling suburban-style municipalities of Europe and North America are favorable for a Private Autonomy model, in which private cars constitute the main mode of mobility, but new technologies enable different uses. Electric, autonomous vehicles expected to dominate, giving drivers more free time, while helping reduce traffic congestion. The study identifies the potential of shared mobility services as a way to mobilize portions of the population that cannot drive or cannot afford to own their own cars. Greater access to mobility could spur a 25 percent increase in passenger miles by 2030, according to McKinsey forecasts. Mass transit will also factor into the equation to reduce congestion, but is likely to take a backseat to autonomous options.

Houston, Texas, the Ruhr area of Germany, Sydney, Australia and other similar developed suburban cities with high per capita GDP and an openness to new technologies are likely to be the first to employ a Private Autonomy model. McKinsey estimates that cities that fall into this category could realize $500 million in annual societal benefits by 2030, enough to boost GDP by .9 percent. From 2015 to 2030, the benefits would amount to $2 billion to $3 billion for the city and $1,800 to $3,300 per resident. Benefits will largely be associated with passenger and pedestrian safety and the avoided cost of congestion. Environmental benefits, however, are likely to be minimal as the result of an increase in miles.

For dense, developed cities, McKinsey predicts the adoption of a Seamless Mobility model — a flexible, highly responsive system that moves residents quickly from place to place, using multiple modes of transport. Enhanced public transit systems and the deployment of shared fleets of public AVs are the cornerstones of this model, providing residences with affordable, efficient and flexible mobility. Integrated mobility platforms that allow cities to gather data from connected vehicles and infrastructure about prices, schedules and real-time conditions will also be critical. An increase in AV use, while pleasant and efficient, could ultimately create challenges in terms of traffic conditions and encouraging low-density development. Effective urban planning strategies are imperative under this scenario in order to enhance mobility. Initiatives such as congestion pricing requiring AVs to park outside city centers could provide important tools for managing the issues that may arise from increased vehicle miles.

Cities such as London, Shanghai and Singapore, which already have high-quality public transit systems, infrastructure investment capacity and expertise with public projects are expected to adopt a Seamless Mobility system before others. The model stands to provide the greatest social benefits of any integrated model, generating $2.5 billion per year by 2030, the cumulative benefit of which would be $30 billion to $45 billion, or $6,000 to $7,400 per resident.

Advances in mobility are already beginning to shape the systems of major cities across the globe, yet cities have largely been addressing mobility trends in isolation from one another. By looking at the future of mobility in a comprehensive, integrated way, cities can better equip themselves to anticipate future demands, understand the impacts of change and develop effective policy prescriptions.