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Knowing your customers’ needs and preferences and providing that service or product will increase your profitability. But for fuel resellers, understanding millennials — aged 15 to 32 and the largest generation in the United States — has proven a difficult task.
When it comes to millennials, defined as the generation born between 1983 and 2000, the picture developing from growing data analysis is worrying for fuel marketers. Simply put by travel behavior analyst Nancy McGuckin, this generation that is projected to outnumber baby boomers by 22 million in 2030 is significantly less impassioned with the automobile than previous generations.
DECLINE IN VEHICLE MILES TRAVELED
Statistics show a 23-percent decline in annual vehicle miles traveled (VMT) by the 16- to 34-year-old group from 2001 to 2009, dropping from 10,300 miles to 7,900 miles each year per capita, according to the latest National Household Travel Survey.
As Federal Highway Administration data shows, U.S. VMT hit a crescendo at more than three trillion in 2007, with per-capita VMT reaching an all-time high in 2004. This would prove to be the end of America’s 60-year driving boom.
The Great Recession from December 2007 to June 2009 was a clear factor in the sharp drop in U.S. VMT. A time when:
- Unemployment surged;
- Discretionary spending cratered; and
- Consumer confidence reeled.
As we look back at this period, millennials were affected more broadly than was widely understood at the time and in ways that now appear may be long-lived. This joined several trends pressuring driving demand already underway.
THE WEALTH EFFECT
Growing household income was a principal feature in greater demand for driving and gasoline from the 1950s through the early 1990s, before the relationship began to diminish. As incomes increased, more individuals acquired vehicles and the number of multiple vehicle households grew dramatically. Families moved to the suburbs, increasing commuting distances, and the number of discretionary driving trips expanded.
Called the “Wealth Effect,” the country reached a saturation point demonstrated when growing incomes failed to continue to generate rapidly higher VMT. During 1990-1997, real personal income growth averaged 3.2 percent annually and VMT 3 percent, which slipped to 2 percent year-over-year growth in VMT from 1997 to 2005 despite similar real personal income growth.
Gasoline demand was further pressured as vehicle fuel efficiency improved under Corporate Average Fuel Economy (CAFE) standards, while retail prices above $3 a gallon prompted conservation by many drivers, including purchasing a more mileage-efficient vehicle.
Increased costs for vehicles, fuel, insurance and maintenance hit millennials harder than other generations.
“Millennials reaching driving age today have no living memory of consistently cheap gasoline,” said the U.S. PIRG Education Fund, which conducted an analysis of the decline in driving in 2012 and updated the findings in late 2014.
DECLINE IN LICENSED DRIVERS
Additionally, more vigorous and protracted testing for driver licenses delayed or shut out some young adults from achieving the legal status of automobile driver. So did policies at many colleges that discouraged students on campus from driving.
PIRG offered data on driver’s licenses held by high-school seniors, which dropped from 85 percent in 1996 to 73 percent in 2010. In 1983, 87 percent of 19-year-olds held a driver’s license compared to 70 percent in 2010, and 68 percent in 2012.