Experts Debate Long Term Sales Trend for Auto Industry

Experts Debate Long Term Sales Trend for Auto Industry

AdAge, the advertising industry bible, published a story this week noting that teenagers no longer seem to be interested in cars like those before them and that the implication for the auto industry was flat sales or worse for the coming decade.

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. Thirty years later only 31% of 16-year-olds and 49% of 17-year-olds had licenses, and the decline continues to accelerate.

William Draves, president of Lern, a consulting firm which focuses mainly on higher education, and co-author of “Nine Shift,” blames teenagers interest in the internet for the decline and 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.

He believes that almost everything about digital media and technology makes cars less desirable or useful. Interestingly, auto industry research firm J.D. Power & Associates reported recently that Gen Y-ers don't talk about cars nearly as much as their elders in social media. Both Draves and J.D. Power see this trend as a permanent effort on the part of the generation to be more productive with their time, noting that most young people live in cities and have access to public transportation where they can work while commuting.

The AdAge story notes Ford and many other car companies are responding to this reality by putting features in their vehicles that make them a node on the internet, always connected and functionally a PC with voice and video features.

Paul Taylor, chief economist with the National Automobile Dealers Association, argues, however, that it is the economy, rather than any long-term secular trend, that has impacted driving and licensing among younger people. He says unemployment has led some younger consumers to drive less and that rising insurance costs for 16-to-19-year-old drivers has likely discouraged cash-strapped parents from allowing them to get licenses. “If job prospects improve,” he said, “people will want the personal freedom and mobility that owning a car provides.”

Who is right? Only time will tell. It is agreed by most economists, however, that in the near term a recovery in auto sales is under way, driven largely by the need to replace a fleet that on average is 9.4 years old, and that this recovery will last for several years with sales near the 14 million mark by 2012.