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Government’s Key Role in Reducing the Societal Costs of Personal Transportation

Anyone who gets behind the wheel is painfully aware of the personal costs of driving an automobile, including $4-per-gallon gasoline and expensive maintenance.

But what about the societal costs of personal transportation?

Of the estimated $3 trillion yearly cost of personal transportation in the United States, for example, nearly 40 percent ($1.1 trillion) is “societal,” related to congestion, crashes, parking, roads, traffic services, and pollution.1 These costs are, in fact, a “hidden tax” amounting to nearly $7,000 per vehicle per year.

The Cisco Internet Business Solutions Group (IBSG) believes that vehicle connectivity can act as a catalyst to help pay for the societal costs of personal transportation, while unlocking additional benefits.

What’s more, governments now have the opportunity to work with other key stakeholders—insurance companies, automotive manufacturers, and service providers—to create a next-generation transportation business model around connected vehicles and a smart, connected traffic infrastructure.

Government’s role in enabling an “Internet of cars” will be a major theme at the Meeting of the Minds 2011 conference in Boulder, CO, September 21-23, 2011 (http://www.cisco.com/web/about/ac79/ps/motm.html). Co-sponsored by Toyota, Philips, Deutsche Bank, and Cisco, Meeting of the Minds allows participants from the public, NGO, and private sectors to engage in lively discussions on how to “connect the dots” across key sectors: mobility, building systems, energy and water resources, and finance.

In the United States, about 25 percent of major roadways are in poor condition, and 25 percent of U.S. bridges are either in need of significant repair or too narrow to handle traffic. Increasing demand is stressing the already fragile system even further. By 2030, vehicle miles traveled are expected to grow 38 percent—from 2.9 trillion to 4.2 trillion miles. Over the past five years, the cost of road improvement increased 55 percent. As a result of these many factors, two to three times the available annual budget of $90 billion to $100 billion is needed to improve conditions.2

Cisco IBSG believes that the “Internet of Cars” offers a truly transformative way to alleviate transportation gridlock and enable new mobility concepts. At this week’s Meeting of the  Minds conference, Cisco’s global consultancy is launching a new thought leadership platform that analyzes the business case for connected vehicles from the perspective of government, automobile manufacturers, service providers, and insurance companies (http://www.cisco.com/web/about/ac79/ps/motm.html#~cv).

Cisco IBSG identifies several opportunities to unlock billions of dollars in value by encouraging smart, connected drivers; understanding smart road pricing; and providing ubiquitous connections to other vehicles and a smart traffic infrastructure. Annual benefits could amount to $1,400 per connected vehicle in the United States.3

Assuming that this approach would connect a third of the U.S. vehicle population, the $1,400 in annual benefits per connected vehicle has the potential to unlock more than $100 billion of value—and could create 400,000 new jobs in the emerging U.S. connected vehicle industry. Globally, the value of connecting vehicles amounts to nearly $350 billion each year.4

In addition, reducing the inefficiency and societal cost of personal transportation—along with enabling new business and pricing models—could make personal mobility affordable for 1 billion more drivers around the world.

 1. Cisco IBSG estimate based on data from Victoria Transport Policy Institute, AAA, U.S.DOT, 2010. This and all other currency references in this paper are in U.S. dollars.

2. “America’s Top Five Transportation Headaches,” AASHTO, Victoria Transportation Policy Institute, 2009.

3. Cisco IBSG, 2011.

4. “The Employment Intensity of Economic Growth in the G-7 Countries,” Padalino Samanta, and Marco Vivarelli, 1997, International Labour Review 136: 191-213. Assumes 33 percent employment elasticity (more conservative than the 0.5 Padalino evidenced) and the estimated “GDP” value of 33 percent of vehicles connected.

Figure 1.     Annual Benefits per Connected Passenger Vehicle, by Source.

Source: Cisco IBSG, July 2011

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