These numbers terrify GM, Ford and the other automakers – Yahoo Finance UK

Posted: Wednesday, January 20, 2016

Driving isn’t cool any more.

Once upon a time, getting your driver’s license was the best thing that could happen to a teenager: It meant freedom, fun and escape. These days, however, apps, videogames and virtual reality seem to be more appealing.

The percentage of young people with a driver’s license has plunged during the last several years, according to a new study by the University of Michigan’s Transportation Research Institute. In 2008, for instance, 65.4% of 18-year-olds had a driver’s license. Now, 60.1% do. The trend has been underway for decades but seems to have intensified since the recession that began at the end of 2007.

In all age groups from 16 to 69, the percentage of Americans with a license has fallen since 2008. Above 70, it has inched up from 78.4% to 79%. This table shows all the changes:

Auto sales have been strong during the last few years, hitting record levels in 2015. Analysts expect a slight increase in sales for 2016, for another record year. But that may be largely due to pent-up demand among consumers who put off buying a car when the economy was weak and are only now catching up.

Fewer licensed drivers, meanwhile, portends fewer car buyers in the future – a problem General Motors (GM), Ford (F) and the other big automakers are all aware of. Technology is part of the reason: Smartphones and social networks now provide a sense of connectivity that the automobile provided before the digital revolution. And they’re way cheaper.

More people these days live in cities, where cars are often more hassle than they’re worth. Many millennials lack the cash for such a big purchase anyway, since the job market for twentysomethings is still soft and the average student-debt burden is near a record high. And many millennials who do drive prefer leasing over buying, since there’s no down payment and you can upgrade your ride more often.

More than 90% of people between 45 and 69 drive, which means car sales probably aren’t about to fall off a cliff. Cheap financing and easing credit help. But automakers are also racing to get ahead of demographic trends by investing in businesses that provide an alternative to car ownership.

GM has invested $500 million in ride-share company Lyft, and it just purchased the remnants of a bankrupt competitor, Sidecar, for an undisclosed sum that’s less than the $39 million investors plowed into the startup. Ford is experimenting with a Zipcar-style car-renting program in a handful of cities and is reportedly teaming with Google on a self-driving car project. And most automakers are partnering with tech titans such as Google (GOOGL), Apple (AAPL) and Microsoft (MSFT) on new software that syncs the car’s entertainment system with smartphones, allowing drivers to bring many of their favorite apps into the cabin and use them straight from the dashboard.

Automakers, nonetheless, are still dogged by worries that Peak Auto is upon us and it’s all downhill from here. Shares in GM and Ford have flatlined during the last two years—despite record sales and strong profits—with investors concerned there’s no growth ahead for car companies. It doesn’t help that emerging markets such as China and Brazil are wobbling, too. There’s no shortage of young people in the world, but there may be a shortage of young drivers.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.


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