24.–26.05.2023 #polismobility

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Csilla Letay in conversation with Prof. Andreas Herrmann, Director of the Institute for Mobility at the University of St. Gallen.

© Müller + Busmann GmbH & Co. KG

© Müller + Busmann GmbH & Co. KG

Prof. Herrmann, you are of the opinion that mobility innovations or even technological developments primarily emerge with pressure from the city. What are the driving factors here?

There are different factors here. One of them is certainly the liberal-green clientele that has established itself in the cities. In Switzerland, we tend to be more conservative, but all cities are governed by liberal-green parties. Many of those who vote green have a high standard of education, a better income and they are very open to ideas of progress. In my opinion, this is an important prerequisite for turning the city into an experimental laboratory for progressive ideas. In addition, basically all the traffic problems we have worldwide are concretised in the urban space. There is a problem of the gigantic growth of cities, which is even more drastic internationally than in Germany. The traffic jams associated with this, in combination with underdeveloped local transport, people are basically becoming immobile. Then we have the issues of emissions and the fight for space, because we can't just build new routes and lanes at will - this is especially true of Asian cities, which have very high densities. Together with the spirit of the cities, these factors are just leading to a departure.

In urban areas, basically all the traffic problems we have worldwide become concrete.

Prof. Dr. Andreas Herrmann

In this respect, the situation is somewhat different in the urban regions and in rural areas ...

Yes, and I believe that it is a socio-political task to provide mobility and infrastructure in rural areas - but not only there - to connect people to urban life, employment and services. In Germany, too, there have been many private-sector initiatives with shuttles or call taxis that ultimately failed because it is simply not worth it from a cost-benefit point of view. But it must not be the case that there is only a good connection if money can be earned with it. Good mobility in rural areas is possible if it is financed through tax revenue and - supportingly - through ticket revenue. We might even have to go so far as to see mobility as a human right, so to speak: Just as we have a right to medical care, we also have a certain right to mobility care.

So is public mobility not to be brought into a market economy context?

I'm not sure that the free-market perspective is the right one. Just look at what happened to Deutsche Bahn when it was supposed to be made fit for the capital market: We are experiencing an enormous investment backlog here. Yet there are a number of indications that it is worthwhile for a state to provide mobility. Let's take Switzerland. Unemployment is low and incomes are high.

This also has to do with the fact that people are highly mobile because the mobility provided is reliable. I can live here in St. Gallen and reach almost any place in Switzerland - Geneva excepted - within an hour in the morning and commute back in the evening. Indirectly, efficient mobility also generates higher tax revenues and thus has a positive effect on the national economy.

Indirectly, efficient mobility also generates higher tax revenues and thus has a positive effect on the national economy.

Prof. Dr. Andreas Herrmann

Would such a sovereign task also mean more regulation?

Not necessarily. This approach does not mean that the provider of shuttles, vehicles or local transport services necessarily has to be the state, it can also be private.

But the crucial point is: one cannot expect that every single route can always be operated in a cost-covering way. We have to say goodbye to that. Providing mobility in this way is also worthwhile because it offers people a perspective, because they can participate in social life. I think that is a value per se.

Mobility is literally the vehicle for social participation, but also for services of general interest and supply. How can shared mobility or even on-demand services be a solution for the state or municipal provision you have outlined?

Shared mobility is of course a lever to reduce traffic on the one hand and mobility costs on the other - in view of the currently very low utilisation of vehicles. In this context, increasing vehicle automation and autonomous vehicles could offer important help. There are already initial concepts, for example from Mobileye, which use autonomous transporters to bring lost services back to the countryside. There will be mobile food transport, for example. It is not only about the fact that people there no longer have a connection to the urban environment, but also about the fact that services are disappearing in rural regions. For example, there are no or no longer enough doctors locally. Mobility can change this situation by bringing goods and services to the people. In the next few years, we will see a number of concepts in this context - some will prove successful and others will not be accepted.

Now we are experiencing a push of new developments, of new companies in the mobility sector - here a start-up, there a joint venture. There may be an oversupply for the time being. How do you see the consolidation of this market? In what time corridor can you think?

You are absolutely right. We have a lot of companies rushing into the mobility market at the moment because the barriers to entry have dropped massively due to new technologies. All I need is a laptop to generate an app with it. When markets like this open up, everyone rushes in and there is consolidation from two sides. One is from the supply side, because there are too many small ones that are taken over because certain technologies don't catch on while others dominate. This is already happening with autonomous driving, for example: There were five to six approaches to controlling such vehicles - currently, one or two concepts are prevailing, which are dominated by Mobileye and Waymo. And in principle, others will follow suit.

But there is also a compelling consolidation on the demand side. Example: Today, every city has its own mobility app. If you travel through Germany, you can or must use 50 apps for it, and each one works differently. At some point, this will be consolidated in terms of manageability. At that point, you have to give the market a little time. In our free-market system, we leave this process to the play of forces instead of imposing something from above, and probably that is the better way.

Is the state flexible enough to react to market dynamics and adapt necessary regulations or framework conditions? Last year, the German law on autonomous driving was passed, to name one positive example ...

I was involved in the drafting of this law. It marks an important step so that we can go into regular operation with these highly automated vehicles within the appropriate legal framework. Many countries use this law as a template that they adapt to their needs. I don't think the regulator is the bottleneck. Nor is the technology.

In the end, it is our own sluggish mobility behaviour that makes it so difficult to bring about change. We now routinely get into our cars in the morning and don't use micromobility or other services. That's basically the big hurdle we have to work on.

You just said that, as a rule, only a few providers will prevail for a certain offer. Can we assume, also in view of our own mobility behaviour, that it will then also be precisely the product or service with the highest usability?

There are two aspects that are decisive in determining who comes out on top. One is usability. The other is scalability. We are talking about a scale-driven business, especially with software solutions. If you can market your app not only in Germany, but also in the USA or elsewhere in the world, then you basically have the leverage. That's why in the end only very few providers will remain. These will offer the simplest solutions that can also be easily transferred to different cultural spaces. They will clearly dominate the market due to their economies of scale, because the costs go down massively when the user numbers increase many times over. We already know these mega-apps from other areas. In this respect, I think we will see a consolidation process relatively quickly in this area.

On the other hand, you calculate the change in social mobility behaviour and the general acceptance of new developments - especially with regard to autonomous driving - in decades. Will we really need that much longer?

Yes, I do believe that mobility behaviour can only be changed in the long run. There are several reasons for this. For example, the modes of transport have never changed since their inception: We still take the train today just as we did the first time from Nuremberg to Fürth. We get into the carriage, show the conductor the ticket and then get off again at another stop. That hasn't changed in over 180 years of German railway history. Nothing has changed with the car either: You buy a car and then drive it. On top of that, the car is emotionally charged. It has something to do with status, self-esteem and what marketing sells us on top of that. These feelings are very deep-seated and have been learned and inherited over generations. The social significance of the car cannot be changed so easily.

Nevertheless, a certain change is already evident: I'm thinking of my children - they didn't want to get their driving licence right away when they were 18. That was the first thing we ever did at that age. Today, the smartphone is much more important for finding one's way in society. That's why I think it takes a whole generation to make this break. If you think about your own habits and routines, you have surely noticed how difficult it is to change.

If we take the example of a new car and weigh up an investment, then we usually make our decision in the context of a cost-benefit analysis with a view to personal needs and thus superficially in the context of a private matter. However, if we were to analyse the issue more comprehensively, i.e. in an overall societal perspective, and if we were to include aspects such as climate impacts in this consideration, wouldn't we actually have to arrive at a different cost-benefit result and act differently?

That's an interesting point you raise. I think there are two reasons for this. Firstly, our individual behaviour has only a marginal influence on global warming. The impact of a car journey from Cologne to Frankfurt cannot even be measured, it is so small. This means that it is difficult if, in principle, the interplay of behaviour and effect cannot be experienced.

interaction of behaviour and effect cannot be experienced. On the other hand, the effects of our behaviour occur with a long time lag. This is problematic. We know from learning theory that a reward or punishment as a reaction to a behaviour must actually be immediately noticeable. When it comes to climate change, it doesn't work that way. And that's where the problem is. Yet we are all affected by climate change. There is no one who is not. It's just that up to now we have mostly felt it in a very abstract way. That's why a general change in behaviour is so incredibly difficult. Wherever you feel direct implications, you change your behaviour very quickly.

From the individual to the automobile industry: In the meantime, there is also the market-economy necessity of change processes - but is that enough?

The automotive industry is under massive pressure, because 40 to 45 % of the added value in the e-car is in the battery and the control software. Today, the components come from Asia. We don't even have our own battery plant in Europe. But the companies in question are spending many millions to delay the necessary change processes through lobbying in Brussels. Hardly any industry has earned as much money in the last decades as the automotive industry - and suddenly the entire business model is under scrutiny and massive pressure. What we are seeing is damage limitation. When an industry is doing very, very well and there is a technological change, it is typically not the original market leaders who can take a pioneering role. This role is taken over by new, often more dynamic companies. New automotive industry locations are emerging in Israel, in Korea, in Finland - and not in Wolfsburg or Ingolstadt. It's fun to build e-cars in Israel because you can optimise the companies for this purpose and don't have to take into account the various structures that have grown up, which in principle want to preserve the old world.

China also pushed the issue back in 2015 and announced that it would promote e-mobility. Because on the one hand it sees the chance to take a leading role and on the other hand in the knowledge that everyone will then have to follow suit - after all, China is a huge sales market. Today, the country is not far away from dominating the market globally. Even though Tesla is leading the headlines, China has built up numerous companies in the background and offers itself the most important and largest future market for e-cars. All these new players have realised early on that they can no longer match the German internal combustion engine with its 130-year head start. We see a mix of technological change, market opportunities and power constellations in this huge industry.

Thank you very much for your exciting presentation.

Prof. Dr. Andreas Herrmann

Prof. Dr. Andreas Herrmann | © private

Prof. Dr. Andreas Herrmann | © private

is Professor of Business Administration and Co-Director of the Institute for Mobility at the University of St. Gallen. He is also Visiting Professor at the London School of Economics (LSE Cities) and at the Stockholm School of Economics and leads the Executive Education Programme on Smart Mobility Management. Herrmann has published 15 books, including on autonomous driving, and more than 250 scientific articles in leading international journals.


Csilla Letay