1.11.2008

true cost of car ownership



Robin Chase, founder of Zipcar,* had this to say about the Tata Nano.

(I think it's a great argument for moving away from our auto-dominated urban transport paradigm.)

We can think of the cost of a car has having three components (and yes, for those life cycle sticklers, I'm simplifying by ignoring the horrors associated with manufacturing and disposal for this post):

THE CAR: purchase, depreciation, maintenance. In the US, that is about $8k a year. While I imagine maintenance to be significantly cheaper in India than here, I am sure it will be the same unanticipated and underappreciated cost it is here. Americans currently spend 18 percent of their household budgets on their cars, how sad it is to contemplate the effects of that percent of income being taken out of the wages of low-income Indians. And because of the size of these unplanned for maintenance needs, I can also easily imagine that many of these cars will end up very poorly maintained, much like the ubiquitous auto rickshaws that flood Asian cities and are some of the dirtiest vehicles around.

CAR STORAGE: People typically park their cars for “free,” even in dense urban areas where the value of street and sidewalk space is high. This free is dramatically undervalued to the other users of this public space. Just as we saw beautiful squares in European villages being turned into parking lots, and acres and acres of land in American suburbia being paved to accommodate the one peak day a year at the mall, so too we can anticipate that every single possible space in Indian cities, in Indian poor neighborhoods, in Indian village squares, on what few sidewalks there were, will soon be filled with beautiful shiny Nanos. I can see the crowded sidewalk clearing for the Nano that pulls in and parks. The driver walks away and the crowd of pedestrians is left with less space. Gone will be places to play, places for markets, places to walk in narrow old neighborhood streets.

CAR DRIVING: Most people think that the cost of driving is just the cost of gas. In the US, this amounts to about 7% of the total costs that we account for and actually do pay. In India, one can imagine that fuel costs will feel like a heavier burden to those driving the Nanos. But the costs of gas are just a very tiny part of the whole. As we have seen from the wave of cities exploring congestion pricing (unfortunately no Indian cities). Congested roads, jammed past capacity already, will become gridlocked. The scooter that has a family of four on it, will be replaced by the safer-for-the-family Nano that occupies four times the amount of space.
Someone want to work out comparable cost for Philippine households?

Robin continues:
What is to be done? Is it fair to deprive lower-income people the opportunity to travel more conveniently and more safely? No. But we need to make every driver pay the real costs of using a car. Those real costs include market prices for storage; road taxes high enough to adequately maintain them once they’ve been built; congestion pricing as appropriate, and carbon taxes on emissions. More details can be found in my other posting on this subject.

Once driving personal cars becomes appropriately priced, we choose to use them == rather than other modes of travel -- when they are the best value for our need.
"The real cost of driving a car" -which is pretty much what I said when other bloggers argued for a fare increase for the MRT.

If we truly account for all the externalities, improving our public transportation becomes all the more urgent and makes so much more economic sense.

(And yes, that very delayed post about how to build a BRT coalition is coming soon...)

*Full disclosure, I am a very happy Zipcar member.

8 comments:

Peter said...

I agree with this one. Many times the true cost of many things is not imputed properly hence the waste and problematic policies which arise from the lack of correct information so people may make smarter more responsible choices. This goes not only for cars but a whole lot of others things.

For the Philippine setting a few things come to mind:

1) Better enforcement of the Clean Air Act would bring out the actual correct cost of maintenance and operations as it affects others through the environment;
2) Increase the price of fuel, with one of the lowest prices of fuel in asia (relatively) at this stage only PUV should be protected from high prices to reduce price fluctuations in mass transport, the current low tariffs on fuel is something we can make money from;
3) Road Pricing specially in key roads, like C5, EDSA, Commonwealth. I'm not sure you can reclaim these to be pedestrian type streets on the other hand I think of these function a lot like highways so I'd get non puv's to pay for the privilege of usage, not only to maintain the road but also to subsidize more mass transport.

I actually don't think Philippine Car penetration rates are that high even with the often quoted comparison versus public vehicles. Nevertheless I do agree that there should be some sort of pricing mechanism of automobiles over and above one time tax (not that taxes are low for a small 3000$ car from china the taxes run up to 54% and this is the low end).

Peter said...

BTW forgot to mention my other pet peeve which is parking as a user i hate paying for parking but as a home builder , the parking code weighs down housing projects with a lot of parking that can't be used.

I must say though that this presupposes a lot of alternatives to use of the car. Something which does not exist now or for the near future in many places.

dish on design said...

Happy New Year, UDC! Whose house were you talking about? Sounds exciting...Say hi to V for me :)

Urbano dela Cruz said...

Hey Peter,

As the green economists would say, we tax the things we should enourage (wages, services) and subsidize those we should discourage (roads, cars).

Not that I stand fully in that camp but I do believe in full cost accounting.

As to your suggestions:

1) Yes to better enforcement -with the caveat that we're pretty weak on enforcement all around.

Some people have suggested creative design solutions to the problems of exhaust - like requiring that the vehicle's exhaust pipe be IN FRONT of the vehicle (driver's side). I bet more that would work better than enforcement.

2 and 3) - yes to correct fuel pricing - with supports for PUV. and yes to congestion pricing

-both, as your correctly point out, require efficient alternatives.

As to car penetration rates in RP -it isn't high if you take the whole of the population vs. total private cars. But that percentage shoots up if you only consider metropolitan areas.

What i'd really like to see is proportionality between private car use and mass transport.

Where can I find a copy of the parking code? Is there a national law or are there city by city ordinances?

UDC

(btw -why aren't YOU blogging? You should air all these challenges to developers.)

Urbano dela Cruz said...

Dish/C,

"Whose house were you talking about?"

? not sure what you mean.

Hope your having fun in Sing!

UDC/k.B.

Peter said...

Even from a Mega Manila Point of View (the correct one to use as a base IMO) the penetration is still relatively low specially compared with other more developed cities in the region. As a person who has interests in selling automobiles (disclaimer) it's interesting to hear car manufacturers complain low car sales per capita (among the lowest in the region specially after adjustment in gdp) and planners who say there is too much!

What sort of ratio between car use and public transport would be efficient in your opinion. I believe currently it's between 10% to 20% (from our automobile industry and housing studies) who use private vehicles in the Mega Manila workforce.

The parking requirement is part of the building code, which can be adjusted by the particular LGU depending on their capability. Most do not touch things like structural requirements but for certain aspects e.g. fire and parking ,it's possible to get certain types of flexibility. Lemme see if I find one you can access online.

Me blog I don't think I write that well!

Urbano dela Cruz said...

Peter,

hmmm -let's see:

Only 10% to 20% of the households own cars.

Private cars represent 90% of the vehicles on the road.

10% of the vehicles on the road are PUVs.

PUVs carry 80% of the persons trips in the city.

---there has to be a rational proportion there somewhere.

what's the average # of cars per household -for the 10-20% that actually own cars?

Urbano dela Cruz said...

...and I didn't know writing well was a requirement for blogging.

What the heck am I doing here?

UDC

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