FocusTyre makers, petchems need to re-think Gen X, Y demand - sources

14 June 2013 15:48  [Source: ICIS news]

Tyre makers, petchems need to re-think Gen X, Y demandBy Mark Yost

CHICAGO (ICIS)--Auto and tyre makers said on Friday that they - and the petrochemical companies that supply them with raw materials - need to re-gauge future demand based upon the consumer behaviour of Generation X and Y consumers who will drive spending for the next 30 years.

In short, cars do not have the same importance for this upcoming generation of consumers as they did for the Baby Boomers, sources said. They are driving considerably less than Baby Boomers once did, prefer jets to cars for vacation and increasingly prefer bikes or public transportation to automobiles.

"We really need to re-think our assumptions about consumer behaviour," said a source, who supplies acrylonitrile-butadiene-styrene (ABS) and other petrochemicals to the auto and tyre industries. "They are really much different than the Baby Boomers and their behaviour is going to significantly impact demand for petrochemicals in North America."

Indeed, according to a study released last year by Frontier Group entitled "Transportation and the New Generation", the average American was driving 6% fewer miles in 2011 than in 2004.

"From 2001 and 2009, the average annual number of vehicle-miles traveled by young people (16 to 34-years-old) decreased from 10,300 miles to 7,900 miles per capita - a drop of 23 percent," the group said in its study.

"The trend away from steady growth in driving is likely to be long-lasting - even once the economy recovers," said Benjamin Davis and Tony Dutzik, authors of the study.

Among the key findings that are likely to impact both petrochemical and tyre demand:

·In 2009, 16- to 34-year-olds took 24% more bike trips than they took in 2001, despite that the age group is shrinking in size by 2%.

·In 2009, 16- to 34-year-olds walked to destinations 16% more frequently than the 16- to 34-year-olds in 2001.

·From 2001 to 2009, the number of passenger-miles traveled by 16- to 34-year-olds on public transit increased by 40% per capita*.

·According to Federal Highway Administration, from 2000 to 2010, the share of 14- to 34-year-olds without a driver’s license increased from 21% to 26%.

According to another study done by KRC Research and the urban car sharing firm Zipcar, 45% of 18-34 years old have made a conscious effort to replace driving with other transportation alternatives, up from about 32% of older consumers who have made that choice. Other lifestyle choices also are expected to impact tyre and petchem demand, including younger people preferring to cluster around public transportation in cities and saying that "protecting the environment" is a major factor in their transportation choices and driving habits.

"This is something that we definitely need to factor into our market expectations," said a source in the petrochemical industry.

"This is really going to impact demand for BD and SBR," said another. "If these new generations are driving less, it means they'll need to replace tyres less often. Replacement tyres are 80% of our business. You do the math."

"Compare this to the annual total BD consumption," said another source. "It doesn't match up."

By: Mark Yost
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