Judging by the daily flood of headlines about the rise of robots, drones and self-driving cars, we can be excused for thinking a giant leap for mankind is right around the corner. And while new technologies are disrupting all types of industries, including infrastructure, the idea that life as we know it will change in an instant is a stretch.
But in the not-too-distant future, autonomous cars and trucks, electric vehicles, and ridesharing services could be mainstream. So what does this mean for investors of transportation infrastructure such as toll roads and lanes?
According to S&P Global Ratings’ recent report, 2018 Global Toll Road Sector Outlook: Increasing Traffic Growth Will Largely Support Credit Stability, fully autonomous vehicles could take decades to become mainstream. Further, close coordination will be necessary between governments and toll road operators in order to bridge uncertainties about infrastructure and stakeholder interests. In other words, any forecast about the future of these services should be taken with a grain of salt.
“The variance between our different AV [autonomous vehicles] disruption scenarios is very large: our low adoption scenario only foresees a 10 percent share of light vehicle sales by 2040,” says Kurt Forsgren, managing director and sector leader for Infrastructure in U.S. Public Finance with S&P Global Ratings. “However, should the revolution follow our high disruption scenario — assuming a 50 percent share of light vehicle sales in 2040 — the effects on society will be profound and far-reaching.”
A highly disruptive scenario could affect private and public transportation issuers and long-dated project debt, Forsgren adds.
“Impacts on toll roads, airports and parking enterprises will vary depending on both the growth of transportation network companies and the individual AV ownership versus mobility-as-a-service model,” he says.
In the meantime, the public and private sectors might actually benefit from increased vehicle trips and other comparatively humdrum technologies, providing potential savings in time and reduced congestion.
“Though toll operators have already used electronic toll collection for nearly 30 years, user acceptance and the application of transponders is now increasing,” says Forsgren. “Toll operators are expanding their networks and interoperability, or, using the same transponder across multiple states, is on the rise.”
Revenues for toll operators also are boosted by a move toward open-road tolling and express, or managed, lanes, and better user data is helping to reduce lost revenue. And stronger laws are helping companies collect citation revenues.
As the industry waits for the seismic promises of advanced technologies, it is the incremental technologies that are hitting the bottom line for tolling companies.
One for the money, two for the road
A report by MetLife, meanwhile, highlights another possible new stream of revenue for tolling facilities brought on by ridesharing and autonomous vehicles. Ride-sharing services such as Uber and Lyft pass tolls on to the rider, and according to MetLife, commuters are increasingly opting out of public transit for these services. But at the moment there is scant data to support a relationship that ties these lost transit riders to increased toll revenue, says Forsgren with S&P. “We have not seen any data to quantify this, though it may likely be a contributing factor to the overall growth in toll road volume.”
As suggested in MetLife’s On the road again report, that data could become more readily available in the future as the adoption of a number of technologies that affect roads and traffic continues.
“Though advances in ridesharing, autonomous vehicles and battery technology are largely separate and unrelated, they will significantly improve the efficiency of transportation networks when combined,” says Adam Ruggiero, head of real estate research with MetLife Investment Management. “Increased traffic may require new thinking in the design and construction of highways, which may need to serve a mix of autonomous and traditional vehicles, or indeed, to separate them entirely to maximize the benefits of the former by allowing higher speeds and smaller distances between vehicles.”
Data on whether or not former transit riders become toll paying drivers — either by sharing services or their own vehicle — also is difficult to track, but it stands to reason if commuters are swapping public transit in favor of automobiles, a portion of these commuters could be using toll roads and lanes.
Furthermore, MetLife estimates that as rideshare drivers are progressively replaced by autonomous cars, the fare per ride with ridesharing will decline significantly, providing further incentive to commuters to travel by road. “The cost of a $10.00 ride would fall to only $7.10 in our relatively conservative scenario,” MetLife notes. “This analysis, however, fails to recognize the importance of scale. Uber, Lyft, and the manufacturers, after all, are not seeking just to build autonomous vehicles, but rather autonomous fleets.”
These fleets are expected to drive the cost per ride significantly lower. That kind of savings and convenience could convince more public transit users to switch to ridesharing, and, in theory, more riders on the roads would contribute to additional revenue for tolling facilities.