Chip Shortage, COVID-19 Unmasks Transit Gaps

I haven’t traveled a lot during the COVID-19 pandemic, but I have flown a few times around the U.S. As a former frequent flyer I pride myself on anticipating most travel circumstances and not being surprised or blindsided, but two recent visits to Austin, Texas, changed that when I couldn’t find a rental car.

It was just 12 months ago that rental car operators were stashing cars at baseball stadium parking areas and vacant lots as the travel industry came crashing to a halt. One might have thought that those same rental car companies would be licking their chops about now as flights fill up and travelers return. One would be wrong.

The problem is that rental car companies liquidated large portions of their fleets, expecting to restore them after the pandemic passed. Just as U.S. consumers are emerging from their pandemic dormancy, with stimulus cash in hand and cabin fever on the brain, rental car companies are confronting the reality of a new car shortage as the supply of microchips for automobiles dries up. Press reports are spreading about travelers resorting to renting U-Haul trucks – a stopgap measure that is likely to flummox graduating college seniors and families in the process of spring and summer relocations.

I have to smile to myself as I read these reports. Almost anywhere else in the world, a lack of available rental cars would be a nothing burger, a non-story. From Asia to Europe to South America, foreign travelers can ably get around with the aid of widely available public transportation or taxis. Who needs a rental car?

The U.S. traveler is uniquely dependent, or perhaps reliant is a better word, on rental cars to get around. One might argue this is the result of the vast open spaces in the U.S. not served by public transit or the insistence on the “convenience” and independence enabled by a borrowed vehicle to get from place to place. The reality is that the country has a long history of hostility toward mass transit – with that hostility emanating from the oil and automotive industries and radiating through the political environment.

Let’s consider the wider impacts of these circumstances. The few flights I have been on in the past 12 months have all been completely packed – with the exception of one Delta flight – United was not as generous or rigorous at preserving open middle seats during the pandemic.

Packed flights means airfares are headed northward with rising demand, as has been widely reported. Combine steeper airfares, with limited or unavailable rental cars and you have a recipe for packed highways this summer as consumers opt for a glorious return to the open road with all of the accompanying risks.

Those still flying will have options should they be unable to locate rental cars at their destinations. Uber and Lyft are likely to see a robust boost in demand – though these operators are facing their own challenges recruiting and retaining drivers who are suddenly able to find better employment opportunities as the economy stirs to life.

Reports are already emerging of renewed interest in taxis and taxi operators are reporting a recovery in demand. Now they, too, must recruit drivers as many of their taxis are sitting idle after their drivers were beaten down and kicked to the curb by the predations of Uber and Lyft and the pandemic.

Where Uber and Lyft are unable to fill the transportation gap, the car sharing sector remains vibrant. Turo and Getaround are seeing a resurgence and, despite the departure from the U.S. of Maven, Car2Go, and DriveNow, operators including Avis’ ZipCar, AAA’s Gig, PSA’s FreeNow, Hyundai’s Mocean, Toyota’s Kinto, and a dozen or more other local operators such as Blink’s BlueLA or Good2Go in Boston have arrived to fulfill local driving needs.

The U.S. is at a strange transportation tipping point where the Federal government is seeking to simultaneously rebuild highways, tunnels, and bridges; rejuvenate mass transit; and modulate personal car use with miles-driven taxes – at a time when consumers are shifting away from mass transit and diving back into their cars to road trip. Concerns over emissions and climate change – reflected in proclamations at global summits and EV investments – appear to have taken a back seat to the call of the open road…which is not so open.

The only saving grace is the growing population of workers indicating that they do not intend or would prefer not to return to commuting to the office. Meanwhile, due to the ongoing automotive chip shortage, demand for new and used vehicles is outstripping supply driving up new and used car prices.

The winners in this emerging scenario will be ride hailing and car sharing operators, new and used car dealers, and the airlines and oil companies. The rest of us can expect a return to gridlocked highways and the familiar sticker shock on the dealer lot. What is new, though, is the almost complete absence of available rental cars.

The lack of rental cars is a truly ominous turn – an unmasking of the vulnerability of the traveling public to the limitations of the automobile industry’s supply chain. This reality ought to motivate a reconsideration of the inadequacy of public transportation in the U.S.

With the creation of the interstate highway system, inspired in large part by Germany’s Autobahn, the U.S. struck a deal with the oil and automobile industries. Now, we are confronting the limitations of vehicular travel based on individually owned cars and a failure to build out mass transit.

The country is turning to electrification as the panacea to solve all automobile-based transportation woes, not recognizing that electrification brings its own challenges related to both supply chain and infrastructure issues. The evaporation of the rental car supply is a reminder that the real missing link in U.S. transportation is a comprehensive network of mass transit joining up highway, rail, and airport hubs.

The Biden Administration’s emphasis on electrification ($174B) over mass transit ($30B) seems more than a little off kilter. Mass transit may not be sexy, but it is precisely because of the investments other nations have made in mass transit that a (presumably) temporary rental car shortage is a non-issue – that is, everywhere else but the U.S. where we have come to rely on the rental car.

That dependence is a red flag that ought to be read as the white flag of surrender that it represents. COVID-19 and the automotive chip shortage have combined to send us a message that we have become and are becoming automobile dependent. This is a weakness that puts U.S. transportation in the category of a Third World country. If we are going to build back better, we ought to focus on fixing this first…with more money for mass transit.

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