The Shrinking Road, Part 1: Have We Hit 'Peak Cars'?

As demographic, technological trends pressure driving, Millennials hold key to future

Samantha Oller, Senior Editor/Fuels, CSP

BOULDER, Colo. -- Remember the concept of "peak oil"--that the world will soon achieve the maximum rate of petroleum extraction possible, if it hasn't already? Now the question may be have we reached an era of "peak cars"?

In a recent webinar held by Navigant Research, "Peak Cars: Flattening Vehicle Sales & Their Implications for Automakers, City Planners & the Cleantech Industry," analysts shared their projections on the potential and impact of long-term static and declining automotive sales. While North America has not yet hit its "peak" in automotive sales and is still several years off, Navigant Research believes it is next in line.

To explain one of the factors providing the momentum, an analyst with the U.S. Public Interest Research Group (U.S. PIRG) shared highlights of the new study, "A New Direction: Our Changing Relationship with Driving & the Implications for America's Future," which analyzes the long-term decline in driving miles in the United States.

"Some will place the slowdown in driving back to the mid 90s, but what we see after 2004 is truly a break with the previous 60-year trend," said Phineas Baxandall, senior analyst for tax and budget policy, noting that since 2004, average vehicle miles driven per person has fallen for eight years in a row. What's significant, Baxandall said, is that the decline started well before the recession.

It took a few more years for total driving miles to also fall, with its descent slowed by population growth. As of March 2013, total driving miles are at about the same level as during the first Bush Administration, Baxandall said. On a per capita basis, Americans are driving at the same rate they did at the end of the first Clinton term.

The analyst noted that high gasoline prices are partly a factor in this decline, but demographics is another. He cited surveys that showed average miles driven among 16 to 34 year olds fell 23% between 2001 and 2009. The trend was seen among young people with jobs and those without, those making more than $70,000 per year and those making less. This coincides with a drop in licensed drivers: The percentage of 16-to-20-year-olds with a drivers' license fell from more than 80% in the mid-1980s to 65% today. Poor economic conditions factor into some of this decline, but Baxandall argued that demographic traits do as well.

"Millennials will be a key factor to what happens in the future," said the analyst, who believes they will start driving more as they begin having kids and buying houses. "The key question is will they drive more than their parents did at the same age?"

Reasons to believe they will not: Millennials are twice as likely as older demographics to say they would like to live in an urban, walkable area, reflecting a recent macro trend toward urban centers. They use non-auto transportation more than other groups. And in surveys, when asked to make a choice between "essentials," Millennials were more willing to give up their car than their mobile phone.

"It's not just young people leading the trend away from driving--it's also there are significantly fewer Americans who are of peak driving age," Baxandall said, noting that those in the 35-to-65-year-old age group drive more miles annually than any other age group but are slowly falling as a percentage of drivers, expected to reach 25% of the driving public by 2020.

The analyst also noted that the gross domestic product and the number of driving miles per person, which used to move in tandem, have recently become decoupled.

"The driving boom era saw steady increases in labor force participation, vehicle ownership and drivers' licensees formed a disproportionate portion of the population," he said, adding that low gasoline prices helped cement this relationship. "Those very same trends have peaked and in some cases reversed. The same factors that were boosting driving in past decades are now headwinds restraining driving."

From Baxandall's perspective, government estimates from the U.S. Department of Transportation and U.S. Energy Information Administration that project a 44% to 67% jump in miles driven by 2040 are tied to outdated assumptions about the driving public. According to U.S. PIRG's own scenarios, which are based on Millennial driving habits, driven miles would grow only 7% to 24%. The public policy group said it believes policymakers must take another look at their projections, factoring the unique motivations of Millennials, and then decide where transportation revenues should go: Toward building wider, new highways or toward repairing the current infrastructure and investing in mass transit.

For a replay of Navigant Research's webinar on peak cars, click here.

To download U.S. PIRG's report, click here.

And for more on the incredibly shrinking transportation revenue base, see part II of our series in tomorrow's issue of CSP Daily News.