US Love Affair With Cars Nearly Finished

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At increasing rates, millennials and generation Z see no need to get a drivers license.

The Wall Street Journal has an interesting article that strikes right at the heart of the auto industry: Driving? The Kids Are So Over It.

About a quarter of 16-year-olds had a driver’s license in 2017, a sharp decline from nearly half in 1983, according to an analysis of licensing data by transportation researcher Michael Sivak.

Whereas a driver’s license once was a symbol of freedom, teenagers are reaching their driving age at a time when most have access to ride-hailing services such as Uber and Lyft to shuttle them around town. At the same time, social media and video chat let them hang out with friends without actually leaving the house. When they reach their 20s, more are moving to big cities with mass transit, where owning a car is neither necessary nor practical. And of those who do buy a car, many more than in older generations opt for a used one, according to J.D. Power.

A new mind-set among many Generation Zers—roughly those born after 1997—is confounding parents and stumping auto makers at a time when new-vehicle sales in the U.S. are slowing. J.D. Power estimates that Gen Zers will purchase about 120,000 fewer new vehicles this year compared with millennials in 2004, when they were the new generation of drivers—or 488,198 vehicles versus 607,329 then.

“That freedom of getting your own wheels and a license—and that being the most important thing in life—is gone,” said Brent Wall, owner of All Star Driver Education in Michigan, a chain of drivers’-ed schools. He said the average age of students in his class is rising. “It used to be the day they turned 14 years and eight months, everybody was lining up at the door. Now I’m starting to see more 15- and 16-year-olds in class.” He frequently hears from parents that they’re the ones pushing their children to enroll.

Cooling on Cars

Cost vs Convenience

Cost is an issue. Detroit is busy churning out SUVs that cost well over $30,000. The cost of insurance is rising.

One can forgo a car but not a place to live. Housing costs have risen far more than the stated rate of inflation.

Death of the SUV

So who has been buying all those large SUVs? Retiring boomers and those flush with assets from the latest Fed-sponsored bubble.

Boomers won't live forever. Nor will the stock market bubble. And just around the corner are fleets of driverless cars and a wave of new services around those cars.

Attitudes

At the heart of this shift is huge change in attitude about cars and housing coupled with amazing technological advances.

Millennials and Generation Z saw what happened in the the Great Financial crisis and the first few years of the rebound. They saw their parents arguing over debt in fear of losing their house. They do not want to fall into the same trap.

We boomers did not have social media outlets when we were in high school and college. Nor did we have cell phones. If you wanted to do something you had to drive or get your parents to take you.

I spent countless hours as a high-schooler, even on weekdays, just driving around going nowhere. Gas was 20 cents a gallon.

The Future

The auto industry will soon not look like what it does today. Cars will be smaller, lighter, electric, and self-driving. Boomers will be gone. Those living in big cities will not need to own a car at all, and most won't.

Boomers are the primary force keeping the current auto trends alive. Demographically-speaking, it won't last.

Expect massive change within a decade, on multiple fronts, including outright ownership.

Mike "Mish" Shedlock

Comments (46)
No. 1-21
Seb
Seb

Amen. Insurance is a racket. My kids don’t want to pay that much. My kid throws up when she thinks about the cost of a car AND college AND a house. Mish you talk about the younger generation and how they’ll do it differently- and they will. My kids talk a lot about crypto with their friends. They don’t trust the dollar. I asked my daughter about how the government will pay its debts and she believes they’ll print money to cover it. Thats what’s in their heads right now. They don’t really care for gold unfortunately. My daughter says it’s too cumbersome. You can’t make change. It’s not convenient. Just giving you some anecdotal stuff from one Hugh school senior.

Seb
Seb

Just now I asked her in the currency started to fail what would her plan be? She said she’d change to crypto. I said crypto is volatile and she said “it’s all volatile probably then”. I asked her why wouldn’t she buy gold and she said “where?”. She said she knows how to buy bitcoin but has no idea where to buy gold. I told her there’s online places to buy gold and they’d send it to her and she said” that takes too long”. More anecdotal at our breakfast table right now. Yes we are eating late for breakfast. Just info on her. She’s a weighted 4.7GPA student who wants to go to med school.

Maximus_Minimus
Maximus_Minimus

Where I live, I balk at the price of car insurance. I can't imagine how a teenager can afford one (or most of the population). Slightly off topic; the German IFO institute (not a fly-by shop) study finds EV in total emit more CO2 than diesel:

davebarnes
davebarnes

As a boomer (with a 2007 Audi 3) who is waiting for a better selection of electric cars, I agree with your future prognostications. We will go 100% EV. It will be small, but a bit higher off the ground as we are aging and want easier entry/exit. We will lease as technology is changing so rapidly.

You do have to account for the fact that we Boomers will be around for another 25+ years.

nic9075
nic9075

Uh the average price of a USED car is $20,000.. Not long ago you would be able to buy a decent 10 year old Toyota Corolla or Honda Civic for less than $10,000 now they are closer to $15,000 for a ten year old model with less than 50,000 miles on the odometer. Then of course the cost to register a car, yearly excise tax, annual state inspection and of course repairs