Forget panic buying, panic driving is next virus fad
by Elizabeth KnightWe saw panic buying in supermarkets at the beginning of the coronavirus in Australia and now with students heading back to school this week and many workers returning to offices or factories, we may be about to experience panic driving.
The economy is starting its initial period of thawing and many people are returning to work but while social distancing measures remain in place, commuters' ability to get there using the traditional means of public transport creates a dilemma.
The capacity restrictions on public transport mean those commuters that cannot fit on trains, buses or ferries may have little choice but to drive. And there will be a portion of the community that will be afraid to ride on public transport regardless of social distancing.
For a period, private cars will be substituted for public transport. (It was almost jarring last week to hear a traffic report on the radio.)
If any part of transportation is experiencing a V-shaped recovery it is car use, according to strategy research by Macquarie Group equity analysts. How sustained this spike in traffic will be depends on how long social distancing measures remain in place and the duration of the current recession. In the short to medium term, a meaningful rise in unemployment will mitigate the increase in car usage.
The potential for increased use of private transportation may also become evident in intrastate leisure trips as holidaymakers are nervous about travelling on trains and planes (to the extent they are flying).
As bad as this may be for congestion, the risk of increased road accidents and for pollution, it may be a short-term windfall for toll road operators. The two listed Australian companies that would benefit most from a spike in the use of cars are Transurban (which operates toll roads in Australia and North America) and Atlas Arteria Group (whose assets are in Europe and North America).
Both have experienced hefty price rises since mid-March when their stock plunged as COVID restrictions forced most of the community to all but remain at home. Since their share price nadir, Transurban has bounced back 30 per cent and Atlas has surged ahead 60 per cent.
They are still well short of their pre-COVID prices but investors are showing renewed interest in their prospects as recovery proxies.
Transurban’s average daily traffic numbers were down as much as 57 per cent across the entire network in the week of April 5 but had recovered somewhat in the week of April 26 to be down 44 per cent. However these numbers have not been publicly updated since so, in many respects, are outdated.
Meanwhile, if the experience in China is illustrative, commuters will return to their cars before they get on a bus or a train. A month ago, traffic data out of China showed congestion levels were back to pre-COVID levels and public transport was experiencing much slower growth.
Data compiled by Macquarie up until May 10 shows a marked V-shaped improvement in expenditure on road tolls and on taxis in Australia but little pick up in the amount spent on public transport whose recovery looks more L-shaped.
Macquarie’s equity strategists have extended the "road recovery" theme to include other listed players that could also benefit from the increased use of private transport. For example, as a leading auto marketplace, Carsales.com is set to benefit. Its share price has also staged a relatively strong recovery in recent months and rose more than 2.7 per cent yesterday.
Car dealership group AP Eagers, which was hit hard by COVID and whose share price fell about 70 per cent from its February high also felt a bit more loved on Monday as its share price picked up 7 per cent. Automotive equipment company Bapcor was cited as another potential winner with its share prices up 2.8 per cent on Monday.
Again Australia can use other other countries to predict patterns of behaviour. Macquarie cited the propensity for US car buyers to buy online nearly doubled from 32 per cent to 61 per cent due to COVID. US online car retailer Carvana’s sales were actually up 20-30 per cent in early May, well ahead of the industry.
The analysis found that in Australia there have been increased Google searches on buying new and used cars.