Vehicle Ownership and Income Growth

Quesion: Discuss about the Vehicle Ownership and Income Growth. Answer: Introduction There is an expansion of car ownership and its use across the globe. There is a continuous growth in the vehicle ownership due to increase in urbanization. The increase in traffic on roads results in the occurrence of global environmental degradation. Besides this increase in the vehicle fleets impose strains on the maintenance facilities of the vehicle. This report emphasizes on the review of the available literature on the topic income threshold before car ownership in developed and developing countries. In order to provide the review of the available literature on the research topic, this report emphasizes on five research questions which are as follows in the form of hypothesis. There is a positive relationship between GDP /capita and car ownership. There are other factors apart from income that also has a effect on car ownership. There is an increased spending of the government on roads and transportation in developing countries. The prices of car is more than the prices of motorbike. There is an increased number of deaths through motorcycles is more than cars. GDP /capita correlation with car ownership In the views of Law, Hamid and Goh (2015), there is a growth in the number of motorcycles in less developed economic countries due to increased urbanization and personal wealth. Besides this, in developed countries, there is an increase in the number of car ownership in developed economies as there is an increase in the income in the country. There is an existence of the inverted U shaped relationship between motorcycle to passenger car (MPC) ownership ratio and per capita GDP. There is an increase in the MPC ownership ratio due to increase in the low level income and it declines at the income at a higher level. In less developed economies such as Malaysia, Cambodia and Vietnam, the major means of transport used by the people is motorcycles (Law, Hamid and Goh, 2015). As per Wu, Zhao and Ou (2014),the main reason behind it is that in less developed economies, there is an existence of low per capita GDP. In such economies, people have a purchasing power to buy motorcycles in place of cars. In advanced economies, there is an increased ownership of cars by the people due to increase in their income which makes it affordable for the people to buy cars in place of motor cycles. Besides this, to access the relationship between the car ownership and per capita GDP, there is a use of linear and logarithmic functions. It is also found out that there is a slow increase in the car ownership at lower levels of income as people cannot afford a car due to low income levels in less developed economies (Wu, Zhao and Ou, 2014) In the views of Dargay, Gately and Sommer (2007), at low income levels, the ownership of the car increases at a slow pace and it increases rapidly and reach to a saturation level. In the high population dense areas there is an increased ownership of motorcycles in comparison to cars. Besides this, increase in the road density results in an increase in the number of car ownership in the area. There is an occurrence of the change in the MPC ownership ratio due to GDP per capita. The main reason behind it is that the per capita GDP helps in the determination of the affordability of the road users in purchasing motor vehicles. Besides this, in the advanced economic countries, the per capita GDP is increased due to which there is a decline in the MPC ratio. In addition to this, in advanced economic countries, there is an existence of high correlation between per capita GDP and car ownership in a country. This is because; people can afford cars easily in the most developed countries as com pared to developing countries (Dargay, Gately and Sommer, 2007). According to Stead and Marshall (2001), income is considered as the major determinant that affects the ownership of cars in developed and developing countries, but there are also other factors that have a significant impact on the ownership of the car by the people of the country. There is an increased ownership of the cars in developed countries due to increased urbanization and personal wealth. Besides this, in less developed countries, there is an increase in the ownership of motorcycles due to presence of increased urbanization and personal wealth. In addition to this, the ownership of the vehicles is also influenced by the socio-economic factors, demographics, geographical characteristics and household (Stead and Marshall, 2001). It is also revealed by Dargay (2007) that there is a presence of lower car ownership in the high urban population density countries due to presence of limited parking space, congested roads, increased cost and presence of efficient public transport. In addition to this, there is an existence of positive relationship between motorcycle ownership and density of population as motorcycles are considered as the cheapest mode of transportation in comparison to cars in highly population dense countries (Dargay, 2007). Besides this, in the views of Eliasson and Mattsson (2006), presence of high motoring cost results in the reduction in car ownership in the country. Along with this, it is also found out that there is a great impact of running cost in comparison to purchase cost on the elasticity of the car ownership in the countries. There is an increase in the motor cycle ownership in a developed country but it fells down once the income level reached the threshold level. In the early stages of economic growth, there is an increased demand of the ownership of motorcycle in comparison to car ownership with the increased demand for means of transport in the countries. In addition to this, people also shifts from motorcycle ownership to car ownership due to existence of several factors such as comfort, prestige, safety and convenience as there is an increase in their income. The other factors that influence the car ownership other than income include road density, urbanization and purchasing power of the people (Eliasson and Mattsson, 2006). In the views of Soltani and Somenahalli (n.d.), it is found out that there is an occurrence of low density in Australia but it has high rate of car ownership. In Australia, there is a high dependency on the cars which has resulted in the increase in the total mobility, associated costs and vehicle traffic. . Besides this, it has resulted in the increasing the importance of automobile travel and reduces the importance of other vehicles. It also results in increasing the problems such as increase in the parking facility costs, traffic congestion and pollution in the country (Soltani and Somenahalli, n.d.). Government spending on roads and transportation As per the Department of Infrastructure and Transport (2011), the Australian government at different levels such as local, territory and state has made an expenditure of $15.8 billion in the year 2008-2009.The funds has been collected in the form of transfers from the private sector. There is an increase in the road related expenditure by 8.57% on an average per year between 2000-2009. Out of total expenditure 81.3 % of the expenditure is done on roads in three largest cities of Australia i.e. 31.9% in NSW, 34.4% in Qld and 15% in Victoria. In addition to this, there is an increase of 2.1% in the road construction and maintenance price index in 2008-2009 in comparison to 2007-2008. There is a decline in the input prices such as diesel and plant hire and depreciation which is counterbalance by the increase in the input costs (Department of Infrastructure and Transport, 2011). As per the Terrill (2016), governments have made heavy expenditure on the transport infrastructure in an inefficient manner. The government has spent money on the infrastructure due to occurrence of some unusual events such as Queensland floods, mining boom and the global financial crisis. Investment made by the government is not made on the basis of cities as cities are considered as the engines or triggering point of the economic growth. Large cities of the country face problems related to congestion, and competition between freight and passengers. The government has spent too much money on highways (Terrill, 2016). As per the report of Congressional Budget Office (2016), the Federal government has spent $46 billion on the highways in the year 2014. Approximately 95% of the funds is spent on the construction, improvement, repairs, operations and management and expansion of the highways (Congressional Budget Office, 2016). Price of car compare to motorbike As per Aspel (2011), there is a difference of approximately 50% between the prices of cars and motor bikes. The cost of moped is half of the price of a car. The price of 125cc motor bike is more than the price of 50cc motor bike. Besides this, the price of motor bikes is less than the price of cars. The price of motor bikes and cars include costs related to insurance, helmet gloves jacket, and license. In case of cars, the price of insurance is three times more than in motor bikes. In addition to this, people have to pay prices to have the knowledge regarding driving a car and there is no need of lessons to be thought in case of motor bikes (Aspel, 2011). According to Best Beginner motorcycles (n.d.), nowadays, there is an increased cost of motor bikes in comparison to the past as new features are introduced in the motor bikes due to presence of intense competition in the market. But the prices of cars is more than the bikes in recent years due to which people in less developed countries prefer bikes over cars as it is cheaper than cars. Besides this, the cost of insurance has also increased in recent past along with the maintenance of the sports bike (Best Beginner Motorcycles, n.d.). In concern for safety purpose death rate in more in motorbike than car As per Carrs (2012), it is found that passengers on motorcycles are prone to more injuries as compared to cars. There is an occurrence of 224 Fatalities on roads from motorcycles. There is a registration of 4.5% of Australian passenger vehicle registrations. There is approximately 155 of road crashes, deaths and serious injuries due to motor bikes. The death of motorcyclist is 30 times the rate of deaths due to cars. Besides this, there is an occurrence of 41 times more serious injuries occurred through motorcycles in comparison to cars. It is also found that approximately 900 motorcyclist were hospitalized in reported road crashes (Carrs, 2012). Besides this, as per the report by Transport Accident Commission (2016), there is an occurrence of less accidents and deaths of older motorcyclist in comparison to younger motorcyclist. Besides this, the reported crashes have doubled from scooters and mopeds in comparison to cars (Transport Accident Commission, 2016). In the views of Peden, et al. (2004), there is an increased number of road crashes through mopeds and scooters when females ride the motor bike or scooter. In addition to this, the occurrence of motor cycle road crashes occurred due to loss of control over the vehicle by the rider. In addition to this, motorcycle crashes occurred near the tourist places at an increased pace as compared to other places due to presence of congestion on roads. There is an increased occurrence of injuries and deaths through road crashes due to several factors such as lack of protection, low visibility, less experience, instability and difficulties related to braking. Besides this, motorbike riders takes risks in the form of recreational riding compared to riding for transport (Peden, et al. 2004). Conclusion It can be concluded that the prices of car is more than the motor bikes due to which people prefer to buy motor bikes in comparison to cars. Besides this, increase in per capita GDP results in increasing the purchasing power of people due to which there is an increased car ownership in comparison to motor bikes in advanced economic countries in comparison to developing countries. There are also factors other than income that has a significant impact on the car ownership such as socioeconomic factors, demographic factors and geographical factors. Besides this, government has also making uinvestments at an increased pace in road infrastructure and transport due to presence of limited parking facilities and space and congestions on roads. In addition to this, the prices of cars is more than motorbikes due to which people prefer to purchase motorbikes in place of cars. References Aspel, D. 2011. Bike vs car: cost comparison. [Online]. Available at: https://www.motorcyclenews.com/news/first-rides-tests/2011/january/jan2711-bike-vs-car-price-comparison/ [Accessed on: 13th January 2017]. Best Beginner Motorcycles. n.d. Are motorcycles cheaper than cars? [Online]. Available at: https://www.bestbeginnermotorcycles.com/are-motorcycles-cheaper-cars [Accessed on: 13th January 2017]. Carrs. 2012. Motorcycle Safety. [Online]. Available at: https://www.carrsq.qut.edu.au/publications/corporate/motorcycle_safety_fs.pdf [Accessed on: 13 January 2017]. Congressional Budget Office. 2016. Approaches to making Federal Highway Spending More Productive. [Online]. Available at: https://www.cbo.gov/publication/50150 [Accessed on: 13 January 2017]. Dargay, J. 2007. The effect of prices and income on car travel in the UK.Transportation Research Part A: Policy and Practice41(10), pp.949-960. Dargay, J., Gately, D. and Sommer, M. 2007. Vehicle ownership and income growth, worldwide: 1960-2030.The Energy Journal, pp.143-170. Department of Infrastructure and Transport. Public road-related expenditure and revenue in Australia. [Online]. Available at: https://bitre.gov.au/publications/2011/files/is_040.pdf [Accessed on: 13 January 2017]. Eliasson, J. and Mattsson, L.G. 2006. Equity effects of congestion pricing: quantitative methodology and a case study for Stockholm.Transportation Research Part A: Policy and Practice 40(7), pp.602-620. Law, T.H., Hamid, H. and Goh, C.N. 2015. The motorcycle to passenger car ownership ratio and economic growth: A cross country analysis. Journal of Transport Geography 46, pp.122-128. Peden, M. et al. 2004. World report on road traffic injury prevention. [Online]. Available at: https://cdrwww.who.int/violence_injury_prevention/publications/road_traffic/world_report/intro.pdf [Accessed on: 13 January 2017]. Soltani, A. and Somenahalli, S. n.d. Household Vehicle Ownership: Does Urban Structure Matter? 28TH Australasian Transport Research Forum, pp.1-11. Stead, D. and Marshall, S. 2001. The relationships between urban form and travel patterns. An international review and evaluation.European Journal of Transport and Infrastructure Research1(2), pp.113-141. Terrill, M. 2016. Roads to riches: better transport investment. [Online]. Available at: https://grattan.edu.au/wp-content/uploads/2016/04/869-Roads-to-Riches.pdf [Accessed on: 13 January 2017]. Transport Accident Commission. 2016. Motorcycle Crash Data. [Online]. Available at: https://www.tac.vic.gov.au/road-safety/statistics/summaries/motorcycle-crash-data [Accessed on: 13 January 2017]. Wu, T., Zhao, H. and Ou, X. 2014. Vehicle Ownership Analysis Based on GDP per Capita in China: 1963-2050. Sustainability 6, pp.4877-4899.