Certainly it's hard to believe for anyone stuck in traffic on the
way to O' Hare airport in Chicago, a bridge or tunnel into
Manhattan, any freeway in Los Angeles, or the newly repaved
four-lane highway to a suburban Walmart. But look around, and the
people in the other cars are likely to be in their 40s or older.
In 1978, nearly half of 16-year-olds and three-quarters of
17-year-olds in the U.S. had their driver's licenses, according to
Department of Transportation data. By 2008, the most recent year
data was available, only 31% of 16-year-olds and 49% of
17-year-olds had licenses, with the decline accelerating rapidly
since 1998. Of course, many states have raised the minimum age for
driver's licenses or tightened restrictions; still, the downward
trend holds true for 18- and 19-year-olds as well (see chart) and
those in their 20s.
It's not just new drivers driving less. The share of automobile
miles driven by people aged 21 to 30 in the U.S. fell to 13.7% in
2009 from 18.3% in 2001 and 20.8% in 1995, according to data from
the Federal Highway Administration's National Household Travel
Survey released earlier this year.
Meanwhile, Census data show the proportion of people aged 21-30
increased from 13.3% to 13.9%, so 20-somethings actually went from
driving a disproportionate amount of the nation's highway miles in
1995 to under-indexing for driving in 2009.
William Draves blames the internet. Mr. Draves, president of
Lern, a consulting firm which focuses mainly on higher education,
and co-author of "Nine Shift," maintains that the digital age is
reshaping the U.S. and world early in this century, much like the
automobile reshaped American life early in the last century.
His theory is that almost everything about digital media and
technology makes cars less desirable or useful and public
transportation a lot more relevant. Texting while driving is
dangerous and increasingly illegal, as is watching mobile TV or
working on your laptop. All, at least under favorable wireless
circumstances, work fine on the train. The internet and mobile
devices also have made telecommuting increasingly common,
displacing both cars and public transit.
Blame environment
The environment is the reason Gen Y-ers most often give for
wanting to drive less, Mr. Draves said. But he sees the fundamental
economic transformation wrought by the internet (and, apparently on
the internet; research firm J.D. Power & Associates found that
Gen Y-ers don't talk about cars nearly as much as their elders in
social media). This demographic will be working on "intangibles" in
professional jobs, not on tangible things that require physical
presence, Mr. Draves said. "Time becomes really valuable to them,"
he said. "You can work on a train. You can't work in a car. And the
difference is two to three hours a day, or about 25% of one's
productive time."
Ford Motor Co. sees the trend as well, which is why it has
introduced features such as Sync in its cars. "I don't think the
car symbolizes freedom to Gen Y to the extent it did baby boomers,
or to a lesser extent, Gen X-ers," said Sheryl Connelly, global
trends and futuring manager. "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."
Digital technology "allows teens to transcend time and place,"
she said, "so they can feel connected to their friends virtually."
New options like Zipcar also make it easier to do without permanent
car ownership, she said.
Millennials "are an important customer to us," said Ford's Ms.
Connelly. "But we also understand the context in which they use
cars has changed. ... It has nothing to do with performance or
getting you from point A to point B. It's just a change in what
people expect to be delivered."
The economy, rather than any longer-term secular trend, has
impacted driving and licensing among younger people, said Paul
Taylor, chief economist with the National Automobile Dealers
Association. Unemployment has led some younger consumers to drive
less, and the cost of insuring a 16-to-19-year-old driver alone can
discourage cash-strapped parents from allowing them to get
licenses. State licensing requirements and restrictions by many
high schools and colleges on driving are also a factor.
Mr. Draves, however, notes that the shift began well before the
recession or the preceding run-up in gas prices. The real-estate
markets most profoundly affected by the bursting housing bubble --
such as Las Vegas and other Sunbelt metro areas -- are boom towns
built around highways with no substantial train transportation.
Real-estate markets that have been less affected or quicker to
recover include Boston and San Francisco, which have strong urban
rail systems. In New Jersey, Connecticut, Boston, Denver and
Chicago, housing prices near new or existing train stations have
either been among the first to recover or have seen less
depreciation during the bursting of the housing bubble.
In fact, Mr. Draves predicts a resurgence of urban living in
denser housing surrounding train stations. As a result, suburban
shopping malls and big-box stores such as Walmart, Target and club
stores that rely on people hauling big purchases away in cars stand
to suffer.
Before you scoff, consider Walmart. Few, if any, retailers are
quite as dependent on the car. Walmart has yet to find a highly
profitable small-store concept that fits densely packed urban
areas; it's disproportionately strong in rural and suburban areas
and has had trouble penetrating big cities with mass transit.
When gas prices dropped sharply in late 2007, Walmart started
posting its best same-store sales results in years. The rebound in
gas prices was just as tough on Walmart as the drop was favorable.
The retailer's year-over-year customer traffic turned negative last
year just as gas prices shot past their 2008 levels, U.S. Chief
Operating Officer Bill Simon said in a March speech to
analysts.
E-commerce wins
Gen Y's driving-behavior shift, however, won't just be about
helping main streets return as big-box retailers fade, Mr. Draves
said. E-commerce is likely to benefit, too, as categories at first
resistant to e-commerce take another serious crack at it.
Alice.com, which is providing the platform and fulfillment now for
more than 60 mainly package-goods e-stores, is seeing a growing
share of its business, which drew close to 700,000 visitors in
April from Gen Y shoppers, according to Compete.com, said CEO Brian
Wiegand.
"This new generation, their first thought is not 'let's drive to
the store to get these things,'" he said, "but 'let's get them the
easiest, fastest, cheapest way.' We call them internet-first
people. We think that's an important segment for us, and it's also
the biggest segment for our iPhone app, which is almost all Gen
Y."
Of course, the trend is mainly bad news for an auto industry
struggling to recover from its steepest downturn since the Great
Depression. The combination of Millennials driving less and boomers
retiring led Carlos Gomes, economist with ScotiaBank in Toronto, to
issue a downbeat forecast for long-term vehicle sales in North
America in February. He projects growth in U.S. new vehicle sales
of only around 0.6% annually over the next decade, cutting nearly
by half the 1.1% growth rate of the prior decade.
While the need to replace a fleet that averages 9.4 years old in
the U.S. favors the auto industry short-term, demographics and
driving trends argue against a robust recovery, he said. Citing his
own teenage children and their friends in Toronto, Mr. Gomes said,
"they just prefer taking the train."
But some argue it's not a permanent shift in preferences away
from driving -- rather a shift toward driving later.
'Delayed, not denied'
Driving is more likely "delayed than denied," argued NADA's Mr.
Taylor. "That age cohort may eventually get married and have
children. Living near work is something you do when you're young
and single, and when you start picking out schools and amenities
you want for your children's development, people are less willing
to live near the office."
According to DOT data, it costs $8,000 a year to operate a car
based on the average 15,000 annual miles driven. In all, Americans
spend $1 trillion to $2 trillion annually on automobiles, Mr.
Draves said, including everything from the cars themselves to the
roads they run on, the gas they need and the $100 billion spent
insuring them.
The trend of Gen Y driving less is definitely on the radar of
State Farm, said Tim Van Hoof, director-marketing communications at
the No. 1 insurer, and it's changing how it goes to market. The
company just launched a new campaign targeted at younger customers
that "tries to start a broader conversation," about life, renters
and homeowners policies, rather than just auto, he said. Of course,
cars won't disappear, nor will the changes happen overnight. Mr.
Draves predicts that by 2020, the combination of younger people
driving less and boomers retiring will cut mileage driven in the
U.S. by half.
Today, only 30 of the 100 metropolitan areas that account for
three quarters of U.S. population have trains, but Mr. Draves said
pressure is building to build more. Denver, Charlotte, N.C., and
Portland, Ore., are among those with systems under development, and
Cincinnati is debating the development of a streetcar system that
would link its downtown with uptown neighborhoods increasingly
popular with young professionals.
NADA's Mr. Taylor acknowledged that telecommuting is growing,
but not as fast as pundits predicted five or 10 years ago. And
while there is a train line being built in front of NADA' McLean,
Va., offices, it's been a difficult process for which funding was
tough, he said. "If job prospects improve," he said, "people will
want the personal freedom and mobility that owning a car
provides."
