Cars once facilitated social outings. Has that role been filled by technology?
The Western world's century-old love affair with the automobile is coming to an end.
People are driving less than they did before the recession, and there are fewer cars on the road. In the U.S., the number of vehicles per driver has fallen from a peak of 1.2 in 2007 to 1.15 today, according to data compiled by Schroders, an asset management firm. Young Americans are getting their drivers' licenses later than they did in 1983, or even in 2008. Fewer Britons under the age of 30 have licenses today than in the 1990s. And many young people on both sides of the Atlantic are not getting licenses at all.
This could very well be the end of the road for car culture, writes Katherine Davidson, automotive analyst at Schroders, in a fascinating note that makes the argument that car sales may never recover to their pre-recession peak. The reason comes down to two things: urbanization and smartphones.
A status symbol no more
The majority of the world's population now lives in cities. And young people are increasingly willing to stay there, unlike their parents, who flocked to the suburbs as their families grew. Nearly two-thirds of American "millennials," or people born after 1984, live in cities today, and some 40 percent say they're not leaving. For them, "cars are not as relevant as a status symbol, and getting a license is no longer a 'rite of passage' in the way it once was," writes Davidson.
Urban centers, of course, are less pleasant and more expensive to drive in, thanks to congestion, lots of traffic lights, and pricey parking. And the proliferation of smartphones—with apps that let city residents access real-time information on public transport and capabilities that have given rise to private taxi services like Uber—add to the sense among city dwellers that owning a car is an unnecessary expense.
This chart shows that interest in car ownership has increased from recession-era lows. But only one age bracket, consumers 55-64, shows more interest now than in 2007—and note the flattening out of the trend line for consumers in the 25-34 age bracket.
A new object of desire
Smartphones cut car use in other ways, too. By allowing people to easily stay in constant contact, smartphones have reduced the number of trips people take. Danah Boyd, a researcher at Microsoft, noted this phenomenon in her 2014 book, It's Complicated, which looked at the use of communications tools among teenagers. "What the drive-in was to teens in the 1950s and the mall in the 1980s, Facebook, texting, Twitter, instant messaging, and other social media are to teens now," she writes [pdf, p.20].
E-commerce also has detrimental effects on car ownership. If your supermarket delivers a hefty order to your home every weekend, trips to the out-of-town hypermarket suddenly become unnecessary. Ditto for bulky items, now delivered from Amazon.
New models needed
What does all this mean for car companies? "Our base case is that there will be a structural stagnation in the developed world auto industry, with no further gains in density and all future vehicle sales driven by replacement demand," writes Schroders' Davidson.
Nigel Griffiths, chief automotive economist with the research firm IHS, is somewhat more sanguine: "We do believe there is a structural change occurring. The question is how significant that is and how pervasive that will be in the long term," he says, adding, "We are being very cautious in our forward-looking models."
One reason is for that is the difficulty in reading structural changes amid a lot of cyclical noise. Gas prices are falling. Exchange rates are volatile. It's not clear where car ownership levels will settle out, post-recession. All of that has "really clouded the issue," says Griffiths.
Emerging markets don't offer much cause for optimism. Modest increases in car ownership in developing countries have already led to gridlocked cities, thanks to terrible (or, in many cases, a complete absence of) urban planning. From Mumbai to Nairobi, and certainly all over China, vast amounts of money are being poured into public transport. While there remains much room for growth in car ownership in these markets, signs are that emerging economies will learn from the west, adopt new technology, and avoid building their cities around the automobile.
This piece originally appeared on Quartz, an Atlantic partner site.
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