Consumer Perspective and It's Impact on Efforts to Decarbonize | Episode 49

  Carpool Chats Podcast |  May 17, 2022

We will not be able to influence the environment through vehicle and energy options if consumers do not have access to them or decide not to purchase and use them. As part of his role at NACS, Jeff Lenard is responsible for overseeing consumer surveys that help explain what consumers want, and the critical elements that drive their decisions related to vehicle choice and driving patterns. Understanding the consumer's mindset is key to understanding what options might exist to guide consumers toward lower emission options.

Guest:

Jeff Lenard, Vice President, Strategic Industry Initiatives, NACS

Transcript:

Speaker 1:
Welcome to Carpool Chats, a podcast brought to you by the Fuels Institute.

John Eichberger:
Hey everybody. Welcome back to Carpool Chats. I'm John Eichberger with the Fuels Institute. Today I'm excited to have a good friend of mine, Jeff Lenard, who's the vice president of strategic industry initiatives at NACS. We're going to be talking about consumer behavior with regards to fueling and vehicles [00:00:30] and transportation, everything. And Jeff, you and I have been working together, man, almost 22 years now, haven't we?

Jeff Lenard:
22 years. Yes. And almost that long on some of these consumer surveys.

John Eichberger:
Yeah. We started doing consumer surveys long, long ago to try to help explain what's going on in the market. And you guys just recently did another survey of consumers earlier this year, correct?

Jeff Lenard: 
We did, in February. About a week before the Ukraine invasion. So gas prices were only about 360 a gallon then, but I think a lot of the consumer sentiment probably [00:01:00] still holds.

John Eichberger: 
So what did you learn? I mean, we've been tracking this for years, but anything noteworthy of consumer behavior, consumer sentiment this year that's different from what you've seen in the past?

Jeff Lenard:
One of the things is... And John, when we did these things a couple of years ago, one of the questions we asked is, are you driving more or are you driving less? And we know that everybody the last two years has driven less. But when we did this a couple of years ago, we also asked, why are you driving less? Because we wanted to find out, is it gas prices? Is it something else? [00:01:30] And if you'll recall from about four years ago, they said that they were driving less because of their job, and they were driving more because of their job.

And that's the same thing we're seeing play out now. People don't drive less because gas prices are more. They figure out a way. I mean, yes, the last two years you could say, I'm not going to work because there were more people that were working from home as opposed to coming in the office. But the reason people drive less, the number one reason they said [00:02:00] they drove less, was they either didn't have the same job or they had fewer errands and social events. And that all plays out because they aren't going to the restaurant as often as they used to. They're not going over to a friend's house as often as they used to. They're relearning some of these social skills. So yes, gas prices are really important and they always will be really important, but that's not why demand had been down.

John Eichberger:
And I think so many people... [00:02:30] And you and I have thought this for years. People have to drive. They have certain places they have to go on a regular basis. Just because prices go up doesn't mean that their responsibilities or obligations change. And so I've looked at the data over the years and you look at national data from the Energy Information Administration. I've got data from 2,000 retail stations over a 12-month period.

And what I've found when I've done the analysis is demand for gasoline is inelastic. It's not going to go up and down because of fuel price. We have not seen that. Now the consumer's going [00:03:00] to be much more vocal about their displeasure when prices are going up. We see that. But they're going to manifest their actions in other ways other than changing how they travel. And you keep hearing the news saying, "Well, gas prices are up. [inaudible 00:03:13] going to be buying more efficient cars." That doesn't really pan out much at all. And so when you guys were talking to the consumers, what are they doing now? What do you expect they might do if prices stay high as they as they have been?

Jeff Lenard: 
Well, first off, just want to go back to when NACS and the Fuels [00:03:30] Institute to a four- or five-year period, we decided let's also look at consumer sentiment. How do gas prices affect the psyche? And at what point is the tipping point that they'll drive less, that they'll do something? So we did it over a four, five-year period. Every month we asked people what is the gas price today? What does it have to get at for you to somewhat cut back your driving? And what does it have to get at to significantly [00:04:00] change your driving behavior? And good or bad, the period that we picked was relatively calm. We saw a little bit of a run up in the spring, but it wasn't like what we have now. And in that four-year period, we saw that I believe prices had to get... Wherever they were, they had to get $1.50 higher for somebody to say, "I'm going to start to change my driving behavior." It had to be something $2 or more to [00:04:30] significantly change how they do things, whether it means buying a new car, public transport, quitting their jobs, something like that.

So the way I describe it is that scene in the movie Poltergeist where the guy's running down the hallway or the mom is running down the hallway and the hallway just keeps on getting longer. You're never going to get to that point. And I think that's what we learned over the last decade or so, that people will say, "I'm going to do this. I'm going to do that." And then you drive around the country [00:05:00] and you look at... There's awful lot of trucks out there. There's not as many EVs as you think out there because these are big changes and they're hard to make. They're easy to say you're going to make. They're really hard to make, though.

John Eichberger:
Yeah. That's not to undermine and dismiss the impact of fuel prices on a family's budget. It can have a significant impact depending on what economic bracket you're in. But what we found is that The Fuels Institute did a study a couple of years ago. We looked at 15, 17 years of vehicle purchase data, and we looked at consumer sentiment and retail fuel prices to [00:05:30] see what parallels there were. What we concluded from that study was consumers buy the vehicle they need. That's number one. What vehicle do I need? If I am a single, I can buy any vehicle I want. If I got a family of five, guess what? I'm not buying a subcompact.

Within that category, they look at what can I afford? And now then they start getting into amenities and fuel economy and they all tie together. But that number one thing is what vehicle do I need? And then what can I afford? Now there's been a lot of discussion [00:06:00] that with the higher prices, maybe that's going to encourage people to accelerate their consideration of an electric vehicle. Did you guys talk to the consumers at all about what their thoughts were in terms of their acceptance, their readiness for the EV market?

Jeff Lenard: 
Yes. And worked with the Fuels Institute, the EV Council on that. And we got some pretty good coverage on the results that we just released in April. But going back to your earlier question, it's like, what else did we learn? People aren't [00:06:30] in a very good mood, and something will be on the chopping block the longer prices stay high. We've seen that savings have been depleted. We've seen things like that if you look at the national news. So something will have to give if gas prices stay high. Either people will be eating out less, they'll be going inside the store less. I think anybody who sells anything probably is concerned about a extended period of high gas prices. So-

John Eichberger: 
[00:07:00] I mean, you go back to your survey. You were talking about the five years of monthly surveys we did. And the thing that really stood out to me was while they may not change their behavior, almost universally, 70% to 80% consistently said that gas prices had an effect on their feelings about the economy. And so that big price line's a huge bellwether for economic health. Now you layer that in with huge inflation right now, yeah, I can understand why they're in a bad mood.

Jeff Lenard: 
Yeah. And you mentioned EVs. Well, we have a teenage [00:07:30] daughter that needs a car. So we looked at vehicles, and you type in things like EVs used, not to be found. You look at new, not really to be found. Hybrids, they are few and far between and much higher priced than the one I bought a couple of years ago. So there may be a interest in doing something, but an inability to do it not only because of what your situation is [00:08:00] in terms of demand in terms of needs, but they just aren't out there.

John Eichberger:
Yeah. They're difficult to find. And that's not just in Northern Virginia. It's not just here. It's nationwide. The supply chain challenges will last two years. The microchip shortage is having a huge impact on the automotive industry's ability to transition, start building new vehicles. Building traditional vehicles is difficult too. I mean, I was talking a friend of mine who works for an auto company [inaudible 00:08:29] a year ago. [00:08:30] Had five days of inventory nationwide. That's all they had. And that is a very dangerous prospect for dealerships because you just can't find the vehicles. Then you add to the fact that earlier this year, most of the electric vehicle manufacturers had to raise their prices for the vehicle.

So we're in this situation where yeah, gas prices are high. And so there's a thought that maybe that's going to encourage people toward alternative transportation long-term, but if it's not available and it's still not affordable, it's stuck. And so trying to figure out a balance. And one thing that [00:09:00] The Fuels Institute's been talking about is we want to be passionate about reducing carbon emissions. We want to bring new technologies, new fuels to the market, but we have to make sure the customer's taking care first because the customer's not satisfied, whatever strategy we put forth on environmental protection is going to fail. And I think an example we're seeing right now, the market imbalance isn't really benefiting consumers the way that some might expect it would.

Jeff Lenard: 
Yeah. And some of the findings that we found in our latest survey, the majority of people have favorable impressions [00:09:30] of EVs, two to three times more than have unfavorable impressions of EVs. The impressions of EVs have become more favorable over the last few years. And this is not just 18- to 34-year-olds. This is almost demographically across the board. So people do have a more positive impression. They're more interested in it. We even ask questions like if you were to go on a road trip this summer and rent a car, would you consider an EV? [00:10:00] And we were surprised what a high percentage said yes because there's always concerns about will I be able to charge? How difficult will be able to charge? Because that was another question we asked. If you are on the road, do you think it'll be easy or difficult to charge? And two-to-one, people said it would be more on the difficult side than easy outside of the home. So there are challenges to that.

We also asked [00:10:30] what percentage of vehicles on the road do you think are EVs? And they said 15%. That's just an open number. And that's the median number. We decided to use the median, which is the middle number of all of them because somebody might say 0, somebody might say 100. So when you get the mean, that might be a little unbalanced. So the mean is the absolute middle number. 20% of the cars on the road are EVs [00:11:00] according to the survey and... or I'm sorry, 15% of cars on the road are EVs. 20% of new cars. And both of those as you know, and as people watching know, is wildly off.

John Eichberger: 
Yeah. But the challenge is people believe what they hear. They believe what they read. And the coverage has been so optimistic and aspirational for electric vehicle market, with good reason. There's a lot of tailwinds pushing the market [00:11:30] toward electrification. But you start thinking, I'm hearing about it all the time. It must be bigger than what I'm seeing. And we hit about 5% of sales or EVs and then less than 1% of vehicles on rotary EVs. So it's a distortion of reality. And I think your survey really brings that to fruition. What is important that we need to really think about from the The Fuels Institute really from that perspective as well is managing expectations. There's a lot of forecasts, a lot of [00:12:00] projections, a lot of pledges out there, but they're not necessarily taking into consideration potential market disruptions. They're not taking into consideration supply chain shortages or microchip shortages. They're not thinking about that.

And so you have companies and organizations forecasting that a 50% of vehicles by 2030 sold will be electric. That puts the industry in a tough situation because now your government leaders believe that. And if you don't hit that [inaudible 00:12:28] question, you're not committed [00:12:30] enough, when reality is the market is evolving, but it's not revolting. It's going to take time. And everything's coming in line for these vehicles to be more viable, more desirable, more affordable, but it's still going to take time. We have not increased the number of EV models available in the United States in the last couple of years appreciably, which we thought we would. But things happen. Things slow down. Things delay.

And being able to keep that concept [00:13:00] in front of us is important because we have a situation where we need to make sure that consumers have access to affordable, reliable transportation. That's got to be number one priority. Yeah. We want to reduce emissions, and we are. We want to provide more efficient vehicles. We are. We want to provide lower-cost fuel. We always try to do that as an industry. But we have to make sure that we're speaking realistically. Aspirations are great, but that doesn't make the situation on the ground change any faster.

Jeff Lenard: 
Yeah. [00:13:30] And also just when you don't look at the market numbers, perception is everything. And when I drive to work... I didn't see this a couple of years ago because I take public transport, but now I drive to work. And I would say more days than not... we're in Northern Virginia... there'll be a Tesla in front of me at some point. And then you start going, "Wow, there's a lot of Teslas on the road." And if you asked any American, name one [00:14:00] auto executive, name 10, they're going to name one. And that guy also makes a lot of news for not selling cars. And every time you hear his name, you think EVs. So there's an awful lot of news because besides Elon Musk, who can you name? I think most people would say, well, Lee Iacocca. Nope, doesn't really work. Henry Ford doesn't really work. And I'm not sure they're going to come up with another name.

John Eichberger: 
[00:14:30] Yeah. And your concept about perception of reality, you see a Tesla every time [inaudible 00:14:35], I remember commuting into the DC area and being in my car by myself, but there's an [inaudible 00:14:41] lane next to me. And I remember going, "Prius, Prius, Prius." Every single car I thought was a Prius. And it wasn't, but it was pretty high count. And you had exemptions., You could drive in it by yourself, but yeah, that perception. And then once you start thinking about it, it's amazing how often you'll notice it. You ever buy a new car... Well, you don't [00:15:00] buy a car very often, but whenever I buy a new car, I think I'm getting a unique car. I want to get something that's different. And then I start driving and go, "Every single car I see looks just mine." It's just you start becoming aware of stuff.

And so I think the media's... One hand, they've really elevated the profile and the awareness of electric vehicles, which is a great thing. But we also have to make sure that we're looking at the market. And especially if you're in the fuel retailing industry, there's a lot of panic out there. My goodness. Am I going to lose my business tomorrow because of the electric vehicle [00:15:30] trend? And the reality is it's going to be plenty of time to transition and offer multiple products that you're going to have to, but the combustion engine liquid fuel vehicle isn't going away tomorrow. It's going to be over decades. And so a lot of attention has to be placed on the energy and the fueling side.

If we center all on consumer behavior and what consumers need and how we can satisfy the consumer mobility needs, then I think we're going to come up pretty good solutions. It's when we forget [00:16:00] to keep that consumer-centric, which is why I'm so glad that you guys continue to do these surveys every year to start really understanding what the consumer wants, what they need, because that's the only way we're going to satisfy the market.

Jeff Lenard: 
Yeah. And a couple of other things, just real quick tips for anybody who's in the industry. We also broke down things. So we looked at the last couple of years. We asked how often do you go to a store once you buy gas, and defined people as either frequent or rare customers. And then we also asked this year, where do [00:16:30] you buy fuel? Do you buy it at a convenience store? Do you buy it at a service stations/kiosk? Or do you buy it at a big-box? And the numbers line up pretty good. 18% said they buy at big-boxes, which is roughly the numbers that we hear in terms of volume. And there are pretty significant differences in what people look for at each place. Certainly for big-box, they don't look for location. What they do look for is price.

You also see that they're much less likely to go inside... [00:17:00] Well, for them, the kiosks, they're very unlikely. When somebody shops kiosk, they're less likely to go inside because it's usually around price as well. With convenience, they're looking at customer service. And then you also look at things like highway or local. And on the highway, they're much more about location to a greater extent, still not as much as price, but they're looking for other things. They're looking for a bathroom. In local, they're looking for that customer service. They're [00:17:30] looking for prepared food. So there are different dynamics in how do you communicate to people. And one final thing related to what they're looking for is we also asked, okay, there's all these technologies or changes in convenience right now. There's delivery. There's curbside. There's app ordering. There's self-checkout and all these other things. We asked, what are the things that you most want?

And I think what is really heartening [00:18:00] for anybody who has a store is they said self-checkout and they said mobile ordering. And the ones that are in the lowest on the list were curbside and delivery. And if you think about it, what they want is they're describing the convenience they want. The convenience they want may require technology to build. But once it's built, it doesn't require much money. And if you look at the bottom two, curbside and delivery, that takes a ton of money [00:18:30] all the time. You won't make that more efficient unless you have robots doing all kinds of things because it's the human element. It's the human element.

John Eichberger: 
[inaudible 00:18:39]. Yeah. Finding employees is tough these days.

Jeff Lenard: 
Yeah. So whether it's retail or whether it's cars, they want something that's cool, that is convenient. They may not want that social interaction. But if you can just appeal to their interests and know what they want, you probably have a winner [00:19:00] if you can get it with the supply chain issues.

John Eichberger:
Yeah. There are so many things out there. And again, if we stay focused on how we satisfy consumer needs, then strategies come through that'll be successful. So if people want to learn more about the survey you did in the report you guys put out, where should they go to get that?

Jeff Lenard: 
Well, it's a cover story in NACS Magazine in the April issue. So nacsmagazine.com. We have some of the information on our fuels resource center, which is if you go to [00:19:30] convenience.org/fuels. We have blogs there where we put out information and additional updates. There's some Fuels Institute information there as well. We'll keep on putting those things out and look for more information. There's 130 questions we asked. So as much as we love numbers, we didn't cover 130 charts in this conversation, thankfully.

John Eichberger: 
Well, you know what? Yeah, thankfully because you know me, I like my spreadsheets. So Jeff, thanks for joining us at carpool [00:20:00] Chats. Really appreciate it. Looking forward to you join us in Indianapolis [inaudible 00:20:03] 2022. And for those of you at home, thanks for tuning in and we'll see you in the next episode. Take care.