Monday, August 4, 2014

Economics of transit: which is more efficient, buses or cars?

Recently, I've come up against a few people who argue that transit is, in fact, not efficient and a waste of money. Their reasoning is the following: the number of passengers per car is 1,6, the AAA says that driving a car costs 60 cents per mile (they're always American), so the cost  of cars per passenger-mile is 37,5 cents. Meanwhile, transit on average costs about 1 dollar per passenger-mile. Transit is thus completely inefficient.

Now, this could be answered pretty simply: if transit is economically inefficient, why are third world cities dominated by transit and not by personal cars? Why do the Japanese pay 10% of their income on transport versus 20% for Americans and Canadians? Empirical examples prove this argument wrong, but let me take this apart in detail.

Vehicle occupancy

First, that 1,6 passenger per car needs to go. Why? Well, first of all, it's incorrect, the real average is 1,2-1,3 passenger per car. But more than that, car occupancy cannot be compared to transit occupancy. When you have a bus with 9 passengers and you have an additional person who wants to use transit, he hops on the bus and the bus has now 10 passengers. When there are 9 cars each with 1 person traveling on a road and someone wants to make a car trip along the same road, he cannot just hop on one of the cars, he must find himself a ride or drive himself. The reality is that carpooling and driving alone need to be analyzed separately, for they are two very separate modes of travel. Driving alone is very flexible, carpooling is not flexible at all, people must agree on a common origin and destination and given times of departure and arrival. Carpooling is much less flexible than transit.

So the proper comparison is between driving alone and transit, because that's the real position most people are in.

Why transit is still a winner in some cases even with these numbers

Even considering the comparison to be an apt one, in fact, transit would still be more efficient for many people. Why? Because supposing car travel costs a fixed amount per mile without differentiating anything is wrong, it's highly dependent on annual mileage, since cars have such high fixed costs. The 61 cents figure is for a car driven 15 000 miles per year. That's an average of more than 40 miles per day. In fact, if you drive 10 000 miles, the cost increases to 78 cents per mile, but that's still a mileage associated with suburbs, not cities. How far do city drivers drive per year on average? Well, in Montréal, that's about 7 500 km per year, less than 5 000 miles.

The AAA didn't provide costs for so low a mileage, but I can extrapolate the data. I also made this extrapolation with Canada's CAA which provides similar data, because Canadian drivers are a bit less subsidized than American drivers (I assumed 1 Canadian dollar = 0,92 American dollar)

Cost in cents per mile per annual mileage, in blue the AAA, in red the CAA
At 5 000 miles driven per year, the cost of a car is a whopping 1,30$ per mile according to the AAA, 1,50$ per mile for the CAA. That's still the equivalent of nearly 14 miles per day. So residents of dense areas who can work, shop and go out in their neighborhood or nearby still would find transit cheaper than cars, even when we accept the numbers as presented.

What do the costs include?

This is a big issue here. The AAA numbers do not include any externalities (pollution, congestion, etc...), only direct costs to the owner, and since highways and roads are quite subsidized in the United States, it biases the comparison. Not only that, but it clearly excludes parking costs, which are quite significant (estimates of parking subsidies range from 150 to 200 billions per year in the US). Congestion is estimated to cost 121 billion dollars in the US too. Meanwhile, the cost of transit includes everything: the cost of buses, of maintenance, the driver's income, the transit administration, the parking garages and depots the transit operator operates, etc...

The main difference that makes car travel seem cheap is without a doubt the labor component. In a car, the driver is free, because you are driving. In transit, you need to pay the driver, who alone represents about 40% of transit costs, at least in buses. Take away the driver's labor and buses, even the inefficient bus system in the United States, becomes as efficient, if not more so, than cars. Going by the STM's budget, around 70% of the cost of transit is labor, so an analysis of the actual resource use (vehicle, fuel, components, etc...) should point out that transit, even the inefficient North American kind, has a cost, excluding labor, of at most 30 cents per passenger-mile.

The argument pushed by the people in favor of cars tends to be one from society's point of view, they make the argument that car driving is cheaper and more efficient as a whole, not just in terms of costs for the user. So they have no excuse for disregarding externalities and parking subsidies, because these are costs that society ends up paying even if the driver doesn't pay them directly.

The issue of passenger-mile

All these comparisons depend on the metric of "passenger-mile". Passenger-mile is a metric that greatly favors the car. Why? Because cars have a lot of fixed costs: you need to buy the car, to pay insurance, to maintain it whether you use it or not, etc... The more miles you drive, the lower the fixed costs appear to be when you measure the price in passenger-mile.

Transit does have fixed costs, but not nearly as much. As much of its costs are actually labor, buses' costs at least tend to be linked to hours of service more than distance traveled. Which means that slow, poorly used transit is expensive if measured in cost per passenger-mile, and rapid, highly used transit is cheap. As most transit in the US is the first, slow, poorly used buses, this biases the comparison. Rapid transit that is highly frequented like subways have much better cost efficiency, in Tokyo, the subway system charges as little as 10 cents per km (16 cents per mile) and is profitable, regional train lines charge from 25 to 45 cents per mile and are profitable. Going from the numbers of the STM budget for Montréal, it seems the subway costs about 30 cents per passenger-mile.

The cost of cars also include a lot of long-distance travel, whereas the urban transit cost is strictly urban, short trips in metropolitan areas. Long-distance transit, whether trains or buses (or planes), is much less expensive per passenger-mile because they're traveling much faster. Amtrak's costs per passenger-mile on its most used lines vary between 30 and 40 cents per passenger-mile, cheaper than cars. And Amtrak is a relatively inefficient train company, mostly still running on diesel engines, with poor average speeds and forced to pay lots of cash to freight companies for use of their tracks.

But why should passenger-miles be the one number that matters? People do not want to travel farther distances, they want to reach their destinations. So in that regard, the cost that truly matters should be the cost per trip. If I just ran out of milk and need to buy a new pint, I want the cost of getting there to be as low as possible, not the cost per mile to be low. I would prefer paying 1 $ per mile for one mile than 0,50$ per mile for 4 miles. But using the passenger-mile reasoning, I'd conclude the exact opposite: that spending 2$ to travel 4 miles is more economical than spending 1$ to travel 1 mile, with the same objective reached in both cases.

Can cars be synonymous with density? Theoretically, perhaps. But this would require parking to be either elevated or underground. Parking is one of these costs that in fact do not vary by mile traveled. If parking fees are 1$ per 30 minutes and you stay for an hour, it doesn't matter whether you traveled 1 mile or 10 miles prior to parking there, you still pay 2$ for the parking, in one case, that increases costs per mile by 1$, in the other, by 10 cents per mile.

How far do you HAVE to travel?

Here is the most important factor a mere numerical comparison doesn't do justice to: transit-oriented areas can be much more compact than car-dependent ones. Cars require a lot of space, roads must be wide, there must be plenty of parking and density can't be too high otherwise you can get congestion, etc... The result is that car-oriented areas tend to be much less dense and impose much longer distances than transit-oriented ones. Furthermore, in sprawl, commercial uses and offices tend to be located on the outskirts of residential areas rather than the center. Why? Because of congestion. Residential areas' value would be reduced if there was important car and truck traffic passing through all the time.

The result is that car-dependent areas tend to increase travel distances by 3 or 4 times. Not only is density significantly reduced, especially for commercial areas, but things are placed in areas far from everything but connected by fast roads, which is good for cars but for no one else.

And indeed, one of the main advantages of transit-oriented developments is that they tend to be walkable. Many trips can be very local and done on bike or by foot, both of which have about no cost. In car-dependent areas, it is very rare that trips can be made on foot.

So the combination of shorter distances to travel and the viability of walking in dense areas mean that transit overall is more affordable than car travel.

Where does the money go?

For local communities, transit has another major advantage. Most of the cost of transit is spent on drivers, mechanics and administration. All of these tend to be employees who work and live in the community. In other words, the money spent on transit stays in the community and strengthens it. Meanwhile, most of the cost of car travel leaves the community. There are few car factories, so the cost to purchase cars flee the community, as does the money for the parts and for gas. There are some local businesses that make money off of cars: middle-men like car salesmen, mechanics and gas station owners. Yet, the reality still is that most of the money isn't spent locally, which weakens a community's wealth and vitality.

In conclusion

A transit-based community is much more efficient and economical than a car-dependent community. However, transit in sprawl tends to perform poorly and be quite expensive. Sprawl is built to allow fast, efficient car travel, and makes bus travel inefficient and uneconomical. Buses as a whole are pretty expensive in an advanced economy where labor is expensive. Therefore, if possible (when potential ridership is high), it is best to convert to more efficient forms of transit like BRT, LRT or subways, all of which use higher ridership and faster speeds to reduce the cost per passenger of trips. Transit must also be seen not as a replacement of walking and biking but as a way to support active modes of transport which are the most efficient modes of transport one could conceive of. And indeed, in the world, high transit mode share tends to be correlated to high walking mode share, because both feed off of each other.

1 comment:

  1. Thanks for the posting.

    This issue is discussed in the 'Comparing Transit and Automobile Costs' section of my report, "Evaluating Public Transit Benefits and Costs" ( ).

    Yes, transit is far more efficient in terms of ownership, operating, road and parking space requirements, accident risk, energy consumption and pollution emissions, and high quality public transit can be a catalyst for more accessible and multi-modal land use development. These can provide significant savings and economic benefits.

    Of course, not all trips are suitable for transit, so the most efficient transport system offers travellers a variety of high quality mobility options and incentives to use the most efficient mode for each trip: convenient walking and cycling for local errands, high quality transit for travel on major urban corridors, and efficiently priced automobile travel (motorists pay directly for using roads and parking facilities, and for the congestion, accident risk and pollution they impose) which tests users' willingness to pay for the costs of such travel.

    Public transit tends to experience scale economies and provides basic mobility for non-drivers, both of which can justify subsidies.

    Best wishes,
    -Todd Litman
    Victoria Transport Policy Institute (