Publications

Investors - OCTOBER 10, 2018

Q&A: How will ride sharing and electric and autonomous vehicles affect parking infrastructure?

by Drew Campbell

Drew Campbell, senior editor of Institutional Investing in Infrastructure (i3), recently interviewed Stefania Belisario, associate director, S&P Global Ratings, about electric vehicles, ride sharing services and autonomous vehicles and how they will affect parking infrastructure assets.

What are some of the ways new technologies affect the future of transportation infrastructure?

The increasing use of ride-hailing services, such as Uber and car sharing, could displace individual car ownership — thereby reducing the number of cars requiring car parking services. This, in turn, could lead to negative credit implications for car park operators. That said, we think the potential impact is not yet clear and the increasing usage of hailing services will largely depend on policy developments.

How about electric and driverless cars?

The development of electric and autonomous cars will likely modify the services that car parks will need to provide in the long term and may restrict car parking demand. It is too early to draw conclusions on the timing for such changes and the overall impact on the sector. However, much of it will depend on the pace of technological innovation and actions taken by regulators. Electrification, in particular, would require significant investment and improved technology to reduce battery costs.

Are there opportunities for car park owners to develop charging infrastructure for EVs?

Opportunities will largely depend on what charges and what revenues the car park operator will bear. At the moment, it is not yet clear how final users will be charged in order to use the charging network and whether a portion of the cost will be borne by car manufacturers, electricity providers or by the car park operator itself. We understand that, in addition to the investment related to electrification, the cost of power remains high depending on the voltage provided. This impacts the time needed to fully recharge the car.

Have parking operators begun to install this charging infrastructure?

The biggest car park operators are already collaborating with car manufacturers and electricity suppliers and have some spaces dedicated to EVs in some of their car parks. However, we understand that only a few are occupied. In our view, to increase the penetration of EVs, significant investments in electrification would be needed within the cities, in order to have disseminated charging points.

Will public budgets or private investment provide the support for these investments?

It remains to be seen whether investments will come from municipalities, car manufacturers or electricity suppliers — or, indeed, from a combination of them. Car park operators will play a role, but they will rather adapt to the needs of the market. The resultant impact on their margins and capex will largely depend on agreements to be found with electricity suppliers and municipalities.

How can investors in car parks and other vehicle-related infrastructure future-proof their investments against the risks posed by these new technologies?

Some related technological advancements also provide opportunities. We expect that car park operators may focus on improving their operating efficiency — thanks to the application of digital services, the use of remote controls and by diversifying services. As a result, we forecast operators’ profitability measures will remain at least stable, provided that they are unaffected by any overseas investment or by any changes in their corporate perimeter, which might be triggered by M&A transactions.

 

 

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