Don’t ex­pect car own­er­ship to be­come ob­so­lete in U.S.

The Buffalo News - - BUSINESS - By Leonid Ber­shid­sky

It’s quite likely that car­mak­ers and of­fi­cials who reg­u­late them are la­bor­ing un­der an im­por­tant mis­con­cep­tion. Car own­er­ship isn’t re­ally re­ced­ing into the past, and the ev­i­dence that young peo­ple aren’t in­ter­ested in own­ing cars has more to do with by­gone eco­nomic trou­bles than with chang­ing pref­er­ences.

The ev­i­dence be­gan emerg­ing a few years ago; in 2013, the New York Times trum­peted “The End of Car Cul­ture” based on down­ward trends in car own­er­ship rates and miles driven in the U.S. The num­ber of young driv­ers ap­peared to be slid­ing, and this was blamed, in one news story af­ter an­other, on mil­len­ni­als’ sup­posed pref­er­ence for rent­ing and shar­ing over own­ing.

Big cas­tles in the air were built on this, whole worlds of shared trans­porta­tion in which car man­u­fac­tur­ers don’t sell their prod­ucts any­more ex­cept to op­er­a­tors of fleets of au­tonomous ve­hi­cles.

In 2016, John Zim­mer, a Lyft co-founder, pre­dicted that car own­er­ship would all but die out in ma­jor U.S. cities by 2025. In its 2018 sur­vey of car in­dus­try ex­ec­u­tives, KPMG wrote of a fun­da­men­tal change in the car re­tail land­scape driven by de­mand for “more in­tel­li­gent mo­bil­ity so­lu­tions in­stead of own­ing a pri­vate car.”

But since at least 2015, aca­demics have been warn­ing that the data on mil­len­ni­als and cars have been con­tam­i­nated by an im­por­tant eco­nomic fac­tor: the global financial cri­sis, which slowed down many young peo­ple’s slog to­ward financial independence.

In a pa­per pub­lished in 2017, Nicholas Klein from Columbia Univer­sity and Michael Smart from Rut­gers wrote that only mil­len­ni­als in dire financial straits owned fewer cars than mem­bers of previous gen­er­a­tions. Those who achieved financial independence owned more cars than ex­pected based on their in­comes and wealth.

“We cau­tion plan­ners to tem­per their en­thu­si­asm about ‘peak car,’ as this may largely be a man­i­fes­ta­tion of eco­nomic fac­tors that could re­verse in com­ing years,” Klein and Smart wrote.

Some more re­cent work ap­pears to bear out this pre­dic­tion. And a new work­ing pa­per from Christopher Knit­tel from the Mas­sachusetts In­sti­tute of Tech­nol­ogy and El­iz­a­beth Mur­phy from the power gen­er­a­tion com­pany Genser En­ergy pro­vides con­vinc­ing proof that not only are mil­len­ni­als as inclined to own cars as previous gen­er­a­tions were, but also they drive their cars more than baby boomers did at the same stage of life.

Knit­tel and Mur­phy found, us­ing U.S. gov­ern­ment data, that mil­len­ni­als own 0.4 per­cent fewer ve­hi­cles per house­hold than baby boomers did. But con­trol­ling for so­ciode­mo­graphic vari­ables ex­plains away this dif­fer­ence. Do­ing the same for ve­hi­cle miles travel data re­veals that mil­len­ni­als are more ac­tive travelers than older Amer­i­cans.

Mil­len­ni­als, Knit­tel and Mur­phy wrote, “op­er­ate un­der many of the same con­straints as prior gen­er­a­tions, and they still have strong pref­er­ences for per­sonal ve­hi­cles.” Most of the U.S. isn’t re­ally built for any trans­porta­tion so­lu­tion other than pri­vate cars.

There’s noth­ing wrong with car­mak­ers’ ex­plo­ration of new trans­porta­tion modes such as ride-hail­ing and car shar­ing, and work­ing to­ward self-driv­ing ve­hi­cles.

How­ever, it would be a mis­take to re­con­sider busi­ness plans as if con­sumer pref­er­ences were un­der­go­ing a radical change. Hav­ing a car of one’s own pro­vides a de­gree of free­dom that can­not be matched by any other trans­porta­tion of­fer­ing. Data do not bear out the ex­pec­ta­tion that peo­ple will give up that free­dom for any rea­son ex­cept be­ing unable to af­ford it.

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