Written by Kay Byrne from Investment, Product and Services at LGT Crestone
Urbanisation is one of the most dominating megatrends in the world today. According to the United Nations, more than half the world’s population now lives in urban areas, and this is expected to increase to around two thirds by 2050¹. In Australia, the urbanisation rate has consistently been above 80% since the 1960s, and in 2021, it reached its highest ever level of 86.4%2, spurred by high rates of immigration.
As our cities deal with an influx of people, mobility systems are increasingly under strain. With urban productivity highly dependent on an efficient transport system, a new way of thinking is required to promote fast, affordable, and reliable access to transport.
The concept of Mobility as a Service has gained momentum in recent years as a potential solution to the demands being placed on infrastructure. It may also reduce emissions and play a critical role in the race to net zero. In this guide, we provide an overview of the impacts of urbanisation, the concept of Mobility as a Service, and the opportunities this offers investors.
While urbanisation creates significant opportunities for smart, sustainable cities, it also places demand on infrastructure and the environment, and according to the World Health Organization, increasing population density can have a detrimental impact on quality of life3:
Higher demands on infrastructure—The accelerated growth of urbanisation has led to increased rates of motorisation and higher demands on infrastructure and parking space in cities. Rising household income has led to higher car ownership and an increased demand fore-commerce and home deliveries, which have created additional pressures. Added to this, several industries have shifted their transport needs to trucking, which has led to an increased use of road infrastructure4. As mobility has increased, infrastructure supply has failed to keep pace, leading to increased levels of congestion in urban areas.
A key driver of CO2 emissions—Poorly planned urbanisation is a key driver of CO2 emissions. The transport sector is the third largest contributor to global greenhouse gas emissions and the only sector where emissions are still increasing5. According to several studies, concentrating efforts on electrifying fleets could accelerate reductions in CO2 emissions by up to four times in the next 10 years6.
Urban productivity is highly dependent on the efficiency of its transport system to move labour, consumers, and freight around7. However, the mobility systems that were designed to be fit-for-purpose a couple of decades ago are now increasingly under strain. Travel is taking longer, is less reliable, and costing both people and businesses time and money.
The problem that city planners are faced with is that it is a costly and slow process to add new infrastructure. Additionally, research suggests that expanding roads only relieves congestion temporarily8. To address the issue of congestion, as well as public transit systems that are either over or under-used9, a new way of thinking is needed.
To accommodate the influx of people moving to our cities, fast, affordable, and reliable access to public transport is needed. The concept of Mobility as a Service has gained momentum in recent years, particularly following trials that have taken place in Helsinki, Sydney, Gothenburg, and Augsburg. The concept involves a shift away from individuals owning private vehicles towards mobility provided as a service. It aims to reshape the entire way we travel from one point to another by combining different modes of transport in a “flexible, personalised,
on-demand and seamless way, through a single interface”10. Rather than relying on private vehicles, Mobility as a Service offers an interconnected service that combines public transport, car-sharing services, and more. It does this via a centralised platform that allows users to register, plan, book and pay for an entire journey and tailor it to their needs.
Disrupting our car culture?
Australia’s first Mobility as a Service trial started in Sydney in April 2019 and ran for two years. Although 82% of the people that registered interest for the trial had daily access to private cars, 17% of the participants reported that the experience of the trial changed their view of car ownership and 82% would have purchased the offering if it became available after the trial.
• Users—Improved travel choice, time savings, cost reductions, and better service experiences. The greatest benefits will potentially be felt by people living in the middle ring of major urban centres.
• Service providers—Could benefit from a boost in profits due to additional volumes.
• Technology providers—Could develop new innovations and new partnerships.
• Society—Reduced traffic congestion and greenhouse gas emissions, as well as an increase in green areas, could improve quality of life.
• Investors—Opens new markets.
Flexible architecture—According to the World Economic Forum, traditional infrastructure will need to be planned with more “flexible architecture”11. Quality telecommunication infrastructure will be needed, and existing infrastructure assets transformed into dynamic transportation networks. New types of spaces such as pick-up and drop-off zones will increasingly appear, and car parks will become logistic warehouses for cars parking autonomously side-by-side12. According to the World Economic Forum, technology offers great potential to increase the social and economic value of infrastructure assets through “predictive maintenance, real-time optimization and peak demand management”13.
Removing data barriers—Governments will need to play a key role in removing barriers, such as sharing more data for public transport. The public sector often has a wealth of valuable data that can be used to improve the design, development, and delivery of infrastructure. However, traditionally, regulations have required that the public sector owns any publicly funded innovation14.
Significant funding—In Australia, funding to build and maintain road infrastructure is sourced from a mix of fuel excise and vehicle registration fees. Fuel excise, which only applies to petroleum products, will not apply to the use of electric vehicles, so it is likely there will be a reduction in revenue. This means that it is likely that governments will be collecting less from users, although roads will be used more, which will create challenges in terms of maintaining infrastructure15.
Repricing of driving and parking—According to UBS, car travel and parking are significantly under-priced, which makes it difficult to break car-centric behaviour patterns. Currently, the auto industry model is based on a cycle of planned obsolescence and technology upgrades, which encourages consumption16.
Collaboration and partnership—Given the work required to integrate public and private infrastructure, collaboration and partnership will be needed between many stakeholders, including transport providers, telecommunication providers, regulators, local authorities, and long-term investors.
Imagine we are in the year 2035...
“Autonomous ride- and car-sharing fleets are cruising through the streets…When the utilisation rate drops below 30% a car is taken out of service. The car which is taken out of service needs to park. But there is no driver inside. So, it cannot be the driver who chooses the car park – it will be the car that chooses where
to park.
What will be the criteria of the car? Is it price? Is it distance? Is it connectivity? Most likely it is a service agreement with a digital ‘Parking as a Service’ operator who established an algorithm to park the car.”
The notion of Mobility as a Service has huge implications for infrastructure investors. To profit from the opportunities, investors will need a deep understanding of the role their assets can play as part of a more integrated system. Active management will be key, as assets are required to respond to changing customer needs and the opportunities available from new technology.
Specific sectors that may realise significant benefits include toll roads and rail. Car parking is also expected to play an important role– but deep sector-specific knowledge will be needed, particularly around the ability of assets to respond to the integration of services such as car fleet management.
For more details on how you can gain exposure to this theme, please speak to your investment adviser.
1 United Nations, 2018, 68% of the world population projected to live in urban areas by 2050, says UN.
2 O'Neill A, 2023, Australia: Urbanization from 1960 to 1921, Statista.
3 World Health Organization, 1993, The urban health crisis—Strategies for health for all in the face of rapid urbanization.
4; 7; 9 Rodrigue J, n.d., The geography of transport systems: Urban Transport Challenges.
5; 6 World Economic Forum, 2021, How to scale up investment in sustainable mobility.
8 Duranton and Turner referenced in Infrastructure Victoria, 2020, Good Move: Fixing Transport Congestion
10 Garcia J, Lenz G, Haveman S, and Bonnema G, 2020, State of the art of mobility as a service (MaaS) ecosystems and architectures – An overview of, and a definition, ecosystem and system architecture for electric mobility as a service (eMaaS), World Electric Vehicle Journal.
11; 13; 14 World Economic Forum, 2019, Transforming Infrastructure: Frameworks for Bringing the Fourth Industrial Revolution to Infrastructure.
12 Intertraffic, 2021, Parking as a service: PAAS, present and future.
15 Infrastructure Australia, 2018, Digital Mobility, Smart Journeys: Australia’s Future Cities.
16 UBS, 2019, Global Sustainability: MIT Summit – Sustainable Mobility: What Can(‘t) Tech Fix?
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