What impact does the growing car fleet have on the Dutch economy?

Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: Thijs Knaap, chief economist at APG, on the question of what impact the growing car fleet is having on the Dutch economy. “This is causing more than just traffic congestion.”

The number of cars in the Netherlands has been rising for decades, but last year it certainly reached a peak. The fleet increased by a whopping 180,000 units to 9.4 million passenger cars. That is an unprecedented number; in previous years, the number of cars increased “only” by about 100,000 per year. Ten years ago, the Netherlands had 8.2 million passenger cars. Now before we have even reached 2030, we are the country of 10 million cars. This is causing concerns. The ANWB, among others, raised the alarm and said in the AD that the Netherlands can still handle the extra cars, but not in combination with delayed roadworks. In 2023, congestion severity - the length multiplied by the duration of the traffic jam - was 17 percent higher than in 2022 and also 6 percent higher than in 2019, the year before Covid broke out. But are those traffic jams the only problem for the economy?

From A to B

“Let me start by saying that the car has brought us far. It has provided mobility, the fact that we can get from A to B easily and relatively cheaply. That gives us a sense of freedom, partly because the car is a kind of private space where, if you want to, you can sing along to the high notes of an Adele song, for example,” Knaap says. That autonomy and empowerment, he says, has caused more and more Dutch people to buy a car. “The Netherlands now has more than one car for every two citizens. On the one hand, that is good for the economy, of course. We don't build cars, but we do assemble them at VDL. We also manufacture a lot of car parts in the Netherlands. Plus, we sort of own many car manufacturers, because we invest in them.”

But, APG’s chief economist acknowledges, there are things to think of that are much better for the Dutch economy than cars. He is aware of the negative effects of the ever-expanding car fleet. Research firm Panteia calculated in 2019 that the economic damage caused by traffic jams came out to between 1.2 and 1.5 billion euros. “Of course, traffic jams cost money. But the simple calculation of the number of hours Dutch people spend in traffic jams times the average hourly wage also seems like an overestimate. For example, because people often volunteer to sit in traffic jams. Because they just enjoy being in the car. Not the morning stress of taking the kids to school, no, just being alone in the car to an appointment or the office. And, oh well, a traffic jam is part of it.”

Emissions and noise

Incidentally, the increasing traffic congestion is only one of the adverse consequences of the increasing “Blik op de Weg” (A Look at the Roads). Knaap: “Think of the emissions and noise. More cars also means that more asphalt is needed. Asphalt that comes at the expense of public space, which is also meant for other things. Trees, for example, but also pedestrian and bicycle paths. America is the picture of doom in that regard; there you find almost no sidewalks left in some places, so you can hardly go anywhere on foot.”

Consequently, Knaap sees many municipal and city governments working on measures that make driving unattractive in inner cities, among other places. “Just look at the parking fees in Amsterdam, that doesn’t make anyone happy. And 30 kilometers per hour is the maximum speed there. In Groningen, you can quickly get from the neighborhood to the ring road, but you can’t cross the city center by car, and it’s been like that since the 1970s."

Road pricing

So, although local councils are very active, it is different at the national level. For years there has been talk of pay by use, better known as road pricing. After all, road pricing could lead to fewer traffic jams, fewer traffic accidents and improved air quality. “Yet, The Hague doesn’t want it, because it is inconvenient for us if our freedoms are restricted, or because of the idea that driving a car will soon be reserved for the rich,” says Knaap. Nevertheless, there is now a plan to introduce road pricing in 2030. One fixed rate will apply, whether you drive during rush hour or off-peak hours. “That’s a missed opportunity, in my view it’s not going to make a difference. You have to differentiate by place and time. Someone in Friesland, driving to their night shift late at night, on the deserted N356 from Holwerd to Dokkum should not be taxed at all. But you should make the Amsterdam resident who travels along the A10 ring road on Monday morning pay for its use.”

Knaap believes that what could make a difference in the future is the self-driving car. “Especially if it is a shared car. It is cheaper for the user than a private car, it is more efficient and comes at less of a cost to public space because those cars are constantly moving and need fewer parking spaces. Self-driving cars are being experimented with in various places around the world with varying degrees of success. Technology, as well as legislation, stand in the way of a large-scale rollout for the time being. Knaap: “But when that breakthrough comes, many Dutch people will no longer need their own cars at all. But even then, not everyone should want to be transported to the Randstad by self-driving cars on Monday mornings. Because then we will still need a lot of cars.”