When will the market shift from petroleum to electric and autonomous vehicles? This is probably the most common question I receive, and it was a frequent topic of discussion at the 2016 NACS Show in Atlanta. The NACS Show, for those unfamiliar, is the largest trade show gathering convenience and fuel retailers from around the world. My response to this question has not really changed over the past 12 months – to predict when the market will fundamentally change, look at the shift in generations.
How many articles, presentations and books have been written about the millennial generation? So many that we are all pretty much sick of the topic, and those within the millennial generation are even more fatigued with the discussion. The attention they gain is understandable – they represent a population the size of the baby boomer generation, and we all know what effect that generation had on the market. With approximately 75 million Americans between the ages of 18 and 34, millennials represent about 23% of the U.S. population. Their impact will be significant.
But I point out that millennials have already become part of the consuming public, and the market is adapting to their influence. And as they have entered the economy as contributing members, the technologies which are heralded as representing the future of mobility are just now beginning to enter the market. Millennials are ready to experiment during the introductory stages of these technologies, but I question whether they will bring on an unrelenting wave of change.
I believe that wave will occur with the following generation – Generation Z. These are children under the age of 18 – not yet a functioning part of society, not contributing to the economy in any personal or direct way, and not yet established in terms of what will be their long term preferences. This generation will emerge after these new technologies have established their foothold, and it will be on their shoulders that promising technologies will succeed or fail.
Think about it – Generation Z will begin to enter the workforce in about 10 years. By then, battery electric and plug-in hybrid vehicles are projected to have a combined market share of up to 8.6% of sales and 3.3% of registered light duty vehicles, according to Navigant Research in an upcoming study to be released by the Fuels Institute. These vehicles will likely have greater range, faster recharge time and lower cost than vehicles available today. By the time Generation Z enters the vehicle market, electric vehicles will be commonplace – no resistance, little uncertainty and a familiarity that fosters acceptance.
What about autonomous technology? Although in its infancy, Millennials seem willing to jump onto the opportunities that AVs present; however, there are many hurdles to overcome before the technology is broadly available to the masses. We may not see this technology in our neighborhoods for 10 years or more, especially when considering the regulatory adjustments that will need to be made to accommodate widespread deployment.
Enter Generation Z. We don’t know yet what they will want from their transportation system, but if we extend the trends that have been observed over the past 20 years it is likely they will want a system that requires their minimal attention so they can focus on other activities. Hence, the maturation and increased availability of autonomous technology could coincide perfectly with the maturation and consumption capabilities of today’s children.
Many continue to say that I am pessimistic about technology advancement – I disagree. Over the next 10 years, transportation technology will evolve at a rapid pace and attention paid to electric, autonomous and other advanced vehicles will gain momentum. Many will say that this will be proof that I am wrong and that the pace of change is much more rapid than I am predicting. I do not disagree that technology will continue to progress unabated, but before the change in our transportation system is “felt” by market participants, these technologies need to gain scale of adoption and that takes time.
Companies will continue to bring new technology to market, and today’s consumers will test and accept or reject certain advancements – all the while preparing the market to deliver to Generation Z transportation technologies that are ready for mass adoption. Then, the pace of change will accelerate and everyone will be able “feel” the momentum, rather than just talking about it.
Read more from the October Issue of our Fuel for Thought newsletter.