Where is the auto industry headed

February 20, 2012
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Fewer 20- to 34-year-olds have driver’s licenses and own cars than the previous generation. They prefer to walk, pedal their bicycles and ride public transit than pay the bills associated with driving and owning a car. And this segment of the population is the most sought-after by cities.

Almost every city, including Grand Rapids, is adding bike lanes to streets and designing urban areas to be more walkable to accommodate that segment’s lifestyle choices in order to keep them from leaving — and it’s a movement the state government has endorsed.

But what do their choices mean for the future of the automotive industry, which has been and remains so vital to Michigan’s economy?

As this group ages and as their younger siblings follow in their footsteps, will fewer cars be made and sold? Will the auto industry lose manufacturing jobs? Will auto suppliers shed workers and lose contracts? Will dealerships employ fewer sales people and mechanics because they’re selling and servicing fewer cars? Based on the latest data, the answer to each of those questions could be “yes.”

A report issued last July from the University of Michigan Transportation Research Institute found that the age composition of U.S. drivers has changed dramatically over the last 25 years. Using data from the Federal Highway Administration, researchers Michael Sivak and Brandon Schoettle discovered that the largest group of drivers in 1983 was between the ages of 25 and 29. In 2008, the largest group was 70 and over.

The report from Sivak and Schoettle said that fewer persons younger than 45 had a driver’s licenses in 2008 than in 1983; they found the largest differences were in the youngest age groups. In 2008, 20- to 24-year-olds were 8.3 percent of all licensed drivers, or 4.6 percent less than in 1983 when that group was 12.9 percent of all drivers. The number of licensed drivers between the ages of 25 to 29 in 2008 was also down from 1983, by 4.3 percent, as was the number of licensed drivers age 30-34, by 3.4 percent.

“Over the past 25 years, there was a substantial reduction in the percentage of young people who have a driver’s license,” read the report. Sivak and Schoettle then extended the 2008 data on the number of licensed drivers another 25 years out in order to get a glimpse of a hypothetical future. “The future evolution of these changes will have potentially major implications for future transportation and its consequences,” they wrote.

One of the major consequences the authors highlighted “was a decrease in expenditures for personal transportation, including those for vehicle purchases.” Others were a decrease in trips, a decrease in the distance driven and an increase in the fatality rate per distance driven. They cautioned, however, not to interpret their findings as a forecast of things to come.

Still, they may be on to something.

“I don’t think the car symbolizes freedom to Gen Y to the extent it did to baby boomers, or to a less extent, Gen X-ers,” said Sheryl Connelly, manager of Ford Motor Co.’s global trends office, to grist.org in late December. “Part of it is that there are a lot more toys out there competing for the hard-earned dollars of older teens and young adults.”

Those “toys,” of course, are electronic devices that allow young adults to stay in touch without having to get together. This helps eliminate a need for physical travel, which can now be done virtually via the Internet.

“It is possible that the availability of virtual contact through electronic means reduces the need for actual contact among young people,” said Sivak. “Furthermore, some young people feel that driving interferes with texting and other electronic communication.”

This trend is present even in those younger than the 20- to 34-year-olds. The number of 16-year-olds who had licenses in 2008 was 31 percent, down from 46 percent in 1983. Sixteen was once an age when teens endlessly bugged their parents for a driver’s license and the car keys. Not so much now. The same finding is true for 18-year-olds: Eighty percent had driver’s licenses in 1983, but in 2008, only 65 percent did.

“American youth have fallen out of love with automobiles,” said Dan Neil, an auto columnist for The Wall Street Journal. Neil said the love affair was dying because of the high cost of owning and driving a car and because young people are “living their lives online” and not on the roads.

That could mean that the future of the auto industry will depend on whether it can rekindle that flame over the next decade.

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