Is The US Love Affair With The Car Ending?

A report published by the US Public Interest Research Group (PIRG) has confirmed anecdotal evidence that young people are moving away from car ownership. Moreover, BMI forecasts show that the number of cars per 1,000 people in the US will continue to decline, suggesting that this demographic trend will start to have an effect on the overall vehicle fleet. Data collected in the PIRG report also supports BMI‘s view that fuel consumption is not necessarily the sole reason behind the decline. Rising ownership costs, increasing urbanisation, and a preference among the young for hi-tech goods are all combining to reduce the reliance on cars.

Overall, there is a long-term risk to the autos sector in developed states, and particularly the US, that car ownership is no longer the priority it once was. Below are a couple of key points:

Licenced drivers in the US fell from 90% of the driving age population in 1992 (the peak) to 86% in 2011.

Within that total, only 67% of 16-24 year-olds held a licence in 2011, the lowest since 1963. This is the biggest worry for carmakers, as it is the future market.

Reasons For The Decline

The cost of car ownership is rising, although this has been a steady increase in comparison with the drop-off in miles driven per person and the number of licences.

There has also been a 7% increase in the urban population over the same time period, which suggests that more people are turning to public transport, car sharing, bike schemes, etc.

For younger people, technology is becoming more of a priority. They would rather own smartphones and computers than a car; hi-tech goods are becoming the new symbol of independence. People may also have less need to see their friends face to face, which would involve a car journey.   

How The Car Industry Is Responding

It’s a tough one, as they need to change the consumer mindset. One strategy is to increase the level of technology in cars to appeal to the younger age group – but this comes with associated costs, which are out of reach for many younger drivers looking for their first car.

Another possibility is to offer new ‘fun’ smaller cars – such as the Fiat 500, and Citroen DS range – but again, these are not cheap.

One of the best opportunities for US automakers could come from the contraction in transport infrastructure spending forecast by our Infrastructure team. If developments in transport cannot keep up with urbanisation, this will provide a window for carmakers.

Further analysis of the global autos sector is available to subscribers at Business Monitor Online.