Nevermind.

Research featured in Business Insider tells us that millennials aren’t much different from their parents’ generation.

“They still want good restaurants, but now it’s also about space, affordability and being able to send their kids to a good public school,” said Paternite, 45, who added that about 70% of her business now comes from young families who are making the move from Brooklyn or Manhattan.

Millennials, typically defined as those born between 1981 and 1997, may be turning into their parents after all. A generation that’s been stereotyped as urban, single, and aghast at the idea of a car-based life in the suburbs is starting to age, prompting fund managers to bet on companies that should benefit if the US birth rate reverses a six-year slump.

Oh, and their supposed desire to get away from cars? Also false:

The generation once seen as shunning cars accounted for 27% of new auto sales in the US last year, up 9 percentage points from 2010, according to a recent study by JD Power and Associates.

The stereotype was probably never true, yet it has driven so much of the policymaking, rhetoric, and spending from City Hall. Readers of this blog see nothing new here. We’ve been debunking the millennial myth here and here and here.

In the meantime, the rest of the city—where people are actually living—has been neglected and left to dry up. Rather than chase mythical populations of the future, we need to fix the real problems that impact the quality of life for millennials—and everyone. This means streets, sewers, schools, crime, and we need to do so efficiently while keeping taxes low.

The post Millennials Prefer Suburbs . . . and Cars appeared first on Show-Me Institute.

However, MADA’s claims hold little merit. The Motor Vehicle Franchise Law bans manufacturer-direct sales for franchisors (meaning those with franchises in the state). Tesla does not use the franchise model to sell its cars, and hence is not banned from direct sales. And this is not a loophole. The Franchise Law was designed as a series of protections to prevent large car companies from undercutting their own franchisees. It was not written to enshrine the independent car dealerships as the only method to sell cars in the state.

That is an important distinction, because whether or not Missourians believe car companies need to be legally prohibited from cannibalizing their own marketing and sales outlets, there is no economic justification banning a manufacturer-direct car sales model. As I wrote in a recent op-ed:

. . . vehicle distribution through dealerships can be costly to the consumer. The 2009 Department of Justice paper “Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers” reported that as much as 30 percent of the cost of a new car is due to auto distribution. Enshrining the car dealership model in law has limited the ability of car manufacturers to both reduce inventory costs and increase customization, practices common in other markets. In Brazil, where GM can engage in direct sales, cost savings from order to delivery averaged 8.6 percent through direct sales.

Car buyers . . . might prefer directly buying from manufacturers for lower prices, customization, or simply to avoid bargaining at a dealership. A J.D. Power and Associates poll found that half of Americans profess a desire to buy manufacturer-direct, even if the prices are equivalent.

While that does not mean the dealership model would or should disappear, the government should not stop Tesla or any other car company from trying something different. That freedom to innovate is essential for a competitive market.

The post Don’t Ban Tesla, Let It Compete appeared first on Show-Me Institute.

The last time I bought a MacBook I made the purchase from an electronic goods store, but I could have bought it from one of Apple’s retail locations. In fact, millions of Americans purchase products directly from manufacturers rather than through a local storefront under independent ownership. Should Missouri pass a law barring Apple from directly selling computers? Such a prohibition would strike many people as an abridgement of freedom of choice, but that sort of policy is exactly the approach some lawmakers want when it comes to selling cars.

In Missouri, like other states, it is illegal for any car manufacturer with franchises to sell directly to the public. Dealerships fought for that regulation, implemented in the 1980s, under the argument that they needed to be protected from predator car companies.

Tesla, a new electric car company that has no dealerships, is selling cars directly to Missourians. Instead of welcoming a new business model to the state, car dealers and politicians like Mike Kehoe (himself a former dealership owner) want to ban direct-manufacturer car sales entirely.

Supporters of direct sales bans claim dealerships just want a level playing field, and that Tesla is getting special treatment. They claim, as all middlemen have, that their position is necessary, that allowing direct competition from manufacturers could allow car companies to destroy the dealership model. That would be bad for Missourians, they assert, because dealerships protect consumers and provide competitive markets. Having many dealers supposedly creates competition, leading to the lowest possible price for consumers.

In reality, vehicle distribution through dealerships can be costly to the consumer. The 2009 Department of Justice paper “Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers” reported that as much as 30 percent of the cost of a new car is due to auto distribution. Enshrining the car dealership model in law has limited the ability of car manufacturers to both reduce inventory costs and increase customization, practices common in other markets. In Brazil, where GM can engage in direct sales, cost savings from order to delivery averaged 8.6 percent through direct sales.

Car buyers in Missouri, and in America, might prefer directly buying from manufacturers for lower prices, customization, or simply to avoid bargaining at a dealership. A J.D. Power and Associates poll found that half of Americans profess a desire to buy manufacturer-direct, even if the prices are equivalent. If dealerships cannot lure customers the way they operate now, why should Missourians be forced to buy their new cars only from them?

Allowing manufacturer-direct car purchases does not necessarily mean the death of dealerships, as long as they can be of service to both buyers and car companies. From the manufacturer perspective, dealerships allow the company to devolve responsibility for advertising, selling, financing, and maintaining a car, which allows the company to focus on car production.

I bought my MacBook from a store, but I wouldn’t force that choice on others in the market. The next time you purchase a computer, you will have the choice to buy from many types of stores or even directly from a manufacturer—business models that meet the needs of customers in different ways.

That’s a vibrant marketplace, and there is no reason the same type of market cannot exist for cars in Missouri. Indeed, if the playing field between Tesla and other car companies needs to be leveled, we should do so by scrapping the ban on direct car sales. There is no reason manufacturer-direct sales cannot exist side-by-side with competitive dealerships.

Joseph Miller is a policy researcher at the Show-Me Institute.

The post Give Tesla and Missourians a Fair Deal appeared first on Show-Me Institute.

The Show-Me Institute has written about the new terminal plan numerous times. We have questioned the need for a new terminal and the lack of reasonable alternatives to the Aviation Department’s plan. We have expressed concern about the cost of a new terminal and the impact of those costs on the airport’s financial viability and competitiveness. We pointed out that many residents like the current layout, ranking No. 1 in overall airport satisfaction in a J.D. Power & Associates survey. In response, we hear that cost per enplaned passenger does not matter, that the current terminal is falling apart, and we are simply standing in the way of a modern MCI.

But as yesterday’s Terminal Advisory Group meeting confirmed, Southwest and the other airlines that serve MCI agree with our position, and yes, costs matter in the air travel business. Their points were:

• The current system meets the airlines’ needs now and for the next 10 years. If customers need more, the airlines can pay for that in the future.
• Airlines have mobile assets and are risk adverse. They will go where they can make the most money.
• The new terminal plan will increase costs and that “higher cost can lead to less service, not more…”
• “The terminals do not generate or impact demand” for flights.
• The example of the billion dollar new terminal at Sacramento International Airport (as the Show-Me Institute publicized), and its subsequent financial and competitiveness issues, are a cautionary tale for MCI.

Essentially, the airline representatives all but said that the $1.2 billion new terminal plan is harmful and unnecessary. Apologists for the new plan are already going for damage control, stating that the airlines are just one voice among many. One Advisory Group member went as far as saying that there is tension between the airlines looking for low costs and the city looking to provide the best experience for is customers.

But the airlines are not just a voice, they are the airport’s tenants and main source of revenue. In addition, as market-driven entities, the airlines’ incentives are more in line with airline customers than city officials. Above all, travelers want cheap, convenient flights, not a shopping mall. If city officials are prudent, they will heed the warnings of the airlines and ground the new terminal plan.

The post Airlines Wary Of New Airport Terminal In Kansas City appeared first on Show-Me Institute.

Unfortunately for the people of Kansas City, they do not have nearly as many choices in new airport terminals as they do for a new television. The Kansas City Aviation Department has presented the city and its residents with a $1.2 billion single-terminal plan, the only alternative being to remain with the current three-terminal design that needs expensive repairs in the future. The federal government is unlikely to provide much aid to Kansas City for the new terminal, meaning that the Aviation Department will have to take on significant debt to pay for the project. Although Aviation Department officials claim that only the airport and its creditors will be repaying the bonds, that is only half the story. The airport must repay its debt with increased costs to airlines and passengers. Higher costs for airlines may result in reduced airline service or higher ticket prices. Higher fees for parking already are built into the new terminal plan. Furthermore, if Kansas City’s airport were to encounter difficulty repaying the bonds, does anyone think the city could or would stand by and let the airport default? With the price tag in mind, it is important for Kansas City residents to know what a new terminal will and will not provide.

The new terminal is not designed to increase flight capacity or gates. The proposed terminal will start with approximately 36 gates compared to the current 62. The airport does not use all the gates it has now, and by the Aviation Department’s own estimates, flight volume will increase at less than 1 percent per year. If anything, the new airport terminal plan calls for downsizing and consolidating operations, not increasing capacity or making Kansas City a hub airport.

So, if the new terminal is not designed to accommodate more flights, why build it? The Aviation Department claims that benefits include centralized security lines, more places to buy goods and services inside security, reduced maintenance costs, and new de-icing pads for the runways. The Aviation Department adds that the current terminal is structurally obsolete, and requires extensive repairs if it remains in use.

The question before Kansas City residents is whether the benefits of the new terminal plan justify both the high cost of the project and the demolition of an airport that many residents find convenient. Those residents may be on to something, as J.D. Power & Associates rated KCI highest in passenger satisfaction among medium-sized airports in 2010. They may decide, like Southwest Airline’s Executive Vice President Ron Ricks, that the new terminal plan’s only rationale is “to provide more customer-service amenities” and that if a replacement is necessary, “We’re confident we could come up with something for the community at a much lower cost than what’s being presented here.” Residents may decide it just does not add up, and keep on shopping, if the Aviation Department will allow them the opportunity.

Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Terminal Shopping In Kansas City appeared first on Show-Me Institute.

At that hearing in the Transportation and Infrastructure Committee, Kansas City Aviation Department Director Mark VanLoh walked the committee through a slide show detailing the problems with the existing Kansas City International Airport. Chief among the reasons for spending $1.2 billion on a new terminal is “poor passenger experience.” Yet none of the material available to the public gives any indication of how the Aviation Department concluded passengers have a poor experience. When I asked about the Aviation Department’s methodology, Johnson responded that my questions would not be answered (questions start at 1:13:30). This matter is important because in 2010, J.D. Power and Associates rated the same airport as “highest among medium airports,” writing: “Kansas City International (MCI) ranks highest among medium airports, and performs particularly well in three of the six factors: airport accessibility, check-in/baggage check and security check.”

In his later remarks disparaging J.D. Power, Johnson wrongly referred to the company as a think tank. It is not. It is a customer satisfaction survey firm that McGraw-Hill owns. J.D. Power is likely known to many voters because its ratings appear in numerous television commercials. VanLoh even said that when J.D. Power rated MCI the best in 2010, his department asked if they could publicize that rating and were told it would cost $80,000 to do so. They were likely correct to demur. But if VanLoh and his colleagues are going to rate the same airport as providing a “poor passenger experience,” it is reasonable to ask how they did so when they endorsed Power’s “best in the country” rating just a few years prior.

If the Aviation Department and their chorus on the City Council want to tear down a much-loved and nationally recognized airport, the public deserves transparent processes and substantive answers to serious questions regarding the endeavor’s necessity.

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