It is common these days to suggest that millennials have dramatically different preferences than other generations.
Whether it is the food they buy or the investments they make, the common consensus is that millennials are fundamentally disrupting a variety of industries due to their divergent preferences. However, such claims have not been explored rigorously and limited data have been used to support those hypotheses.
Recently, here at the Sloan School at MIT, my colleague Elizabeth Murphy and I set out to study the car preferences of those between ages 18 and 37 in a rigorous way, and found that millennials may not be expressing a lack of preference or enthusiasm for vehicles, per se. Instead, their car choices may be dominated more by situational forces — such as the economic problems this generation encountered due to the Great Recession or the likelihood that they live in a city as opposed to a suburb.
Understanding the true preferences of the millennial generation can provide insight into the future landscape of mobility, and thus provide both industry and policy makers with more information about what business practices and policies to implement. This is particularly true when it comes to our policies related to global warming.
The low vehicle ownership statistics that have been attributed to millennials — the ones we’ve been quietly hoping will solve climate change — are likely just an artifact of the economic conditions and general life cycles they’ve faced. Unfortunately, they do not represent some fundamental difference in their demand for cars and this fact will reverberate long and hard in our battle against climate change. Let’s look at the research and let me explain.
Our study focused on two main facets of personal mobility: vehicle ownership, measured by how many vehicles a given household owns, and vehicle usage, measured by annual vehicle miles traveled (VMT). Each of those provides different insights; vehicle ownership gives a better understanding of the market for personal vehicles, while vehicle miles traveled provides insight on vehicle fleet usage as well as environmental footprints.
We found that although a simple comparison of average ownership and use would suggest a difference. But that is comparing apples to oranges, because those simple comparisons do not account for differences in age, income and other factors that may drive the demand for mobility.
Our paper contains two sets of analyses. First, using data from various National Household Transportation Surveys (NHTS), we estimate vehicle ownership rates and annual miles traveled controlling for confounding variables such as income, household size, urbanity and education. We find there is no evidence of a difference in vehicle ownership. In contrast to conventional wisdom, millennials actually drive more miles per year. The most recent NHTS survey took place in 2017, implying the oldest millennial in the data was 37 years old.
Of course, a skeptic would respond to this first set of analyses believing them to be wrong because some of those confounding factors are actually life choices, and millennials are choosing to alter those life choices. To account for this, we also estimate to what degree millennials are altering those life choices, and here’s the important part: by how much those alterations affect vehicle ownership.
To do this, we use Census data and estimate how millennials are changing their marriage rates, urbanity, number of children and income levels. We then estimate how those changes affect vehicle ownership. While we find that millennials are altering life choices that affect vehicle ownership, the net effect of those endogenous choices is to reduce vehicle ownership by less than 1%. We can statistically rule out effects larger than 2%.
Many millennials report they prioritize environmentally friendly products, but our study shows that the so-called “Green Generation” does not exhibit significantly different preferences when it comes to transport. This does not inherently mean millennials do not consider the environment in their car-buying decisions, but for many millennials having a vehicle may not be a choice.
So, what’s the upshot? While there are plenty of interesting ramifications to this for the auto industry, perhaps the most important take-away is for policy makers. Let’s be clear: The U.S. cannot rely on millennials’ preferences alone to reduce carbon emissions. They operate under many of the same constraints as previous generations, and they still have strong preferences for personal vehicles.
Christopher Knittel is the George P. Shultz Professor of Applied Economics at the MIT Sloan School of Management.
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