Monday, January 17, 2005

The Hidden Variable
Whenever you contemplate dramatically improving the gas mileage of cars in America, whether through new technology such as hybrids or by closing the loophole that led to the dominance of SUVs, you must confront two seemingly immovable obstacles: the size of the domestic vehicle fleet (236 million) and its very slow rate of turnover. The former will only increase, but what about the latter? This is the key to future transportation energy savings, in my view.

Conventional wisdom is that Americans will continue to turn cars over every 8 years, on average, or even longer (measured in terms of mean age of household vehicles). Only a few decades ago, that figure was closer to five years. Along the way, several things happened: cars got more expensive (though not by much as a fraction of average income--see below), families wanted to own more cars at the same time, and--with time out for bad behavior in the 1970s and early 80s--cars got progressively better and more reliable.

For years I've been asking what it would take to get us to turn our cars over more frequently, which would incidentally allow more efficient vehicle technologies to have a bigger impact much quicker. There are several possible answers, some of which have already come up short, such as leasing. My favorite is still technology-related coolness, which may explain part of the appeal of the Toyota Prius. But the sample size is too small so far to suggest whether this is changing how long people hold onto a car.

The best contender is probably a return to pizazz, as suggested in this Wall Street Journal guest editorial. I'm old enough to remember a time when the arrival of the new car models in the fall was a really big deal, whether you were in the market for one or not. Based on the steady increase in annual miles driven, cars command an even more central role in our daily lives now than back then, but they have relinquished much of their hold on our imaginations, perhaps partly for that very reason--familiarity breeds contempt.

If you are passionately concerned with reducing the amount of oil Americans use to run their cars, then paradoxically you should be thinking like a real marketer about how to get Americans much more excited about new cars. Could really bold styling, combined with more efficient technology, push that average turnover figure down to six or even five years again? That's what it would take to move America's miles per gallon into the same range as Europe's in our lifetimes. (Some other time we'll talk about what happens to the old cars, which don't all disappear into the crusher the way they used to.)

Note: In 1970 a middle-income family earned just under $10,000 and a new car averaged $3,500, or 36% of a year's income. In 2000 a middle-income family earned about $50,700 and an average new car cost a bit over $20,000, or 40% of a year's income.

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