According to a recent study by CNW, the percentage of car-less
American households increased to 9.3% in 2012 from 5.7% in 1991.
The percentage could further move up to 10% in this year or later
according to the study.
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Another study by the U.S. Public Research Interest Group ("PIRG")
revealed more shocking facts. PIRG found that motorists aged
between 16 and 34 have traveled 23% fewer miles in 2009 compared
with 2001. Further, the ratio of cars to motorists dipped 4% from
1.24 vehicles in 2006.
The trend clearly raises a question: Is the driving boom over? It
is a complex demographic issue that can be explained by many
socio-economic factors. It can also endanger the household
vehicle business of automakers in the future, which became a
low-margin but stable revenue generating business after the
Firstly, when we look at the unemployment figures, the continuous
improvement looks impressive. Unemployment rate in May decreased
to 7.6% in May this year from 8.2% in the same month last year.
Unfortunately, the picture becomes gloomy when we consider the 16
to 24 year age bracket. Unemployment rate in the bracket is very
high at 16.1% now. This could definitely take a toll on the
automotive industry, since this age bracket can be related to
America's once popular "on the road" car culture.
The upward shift in the retirement age has also aggravated the
unemployment problem. The baby boomers, unlike earlier, are
willing to work for a long time in order to make up for the loss
in wealth during the latest recession. This shifted the
retirement age to the highest level in more than two decades,
reducing the labor turnover. As a result, youngsters find it hard
to occupy seats in the job market.
Secondly, mounting student debt is slowly becoming an impending
crisis in the U.S. Outstanding student loans in the U.S. stood at
$986 billion in the first quarter of 2013, up $20 billion from
the prior quarter. Over 10% of these student loans are more than
90 days delinquent.
While student loans help youngsters graduating for obtaining a
high-paying job, the same becomes a burden when they are unable
to find their preferred job. If paying hefty installments on
these loans become troublesome, can they dare think of affording
a new car or other appurtenances?
There seems to be a shift in car buying younger generation as the
priorities of youngsters have changed due to many emerging needs
in the ultra modern life. Youngsters feel much better nowadays by
staying connected to friends through
) in their newly purchased
) iPad or sipping a cup of newly blended
) coffee with college buddies rather than taking a long car ride.
Apart from the opulences, youngsters are inclined to break many
social conventions. They now prefer to delay buying homes and
achieve parenthood much later than their earlier generations. At
the same time, they seem to follow several austerity measures in
order to face the uncertainties in the job market such as living
with the parents, driving their cars occasionally and saving
Also, the younger generation no longer feels the ardent need to
purchase cars due to the developing public transit system. Public
transport is gaining importance due to increasing traffic
gridlock across the major cities around the world. Hanging around
the city with the help of ubiquitous public transit system and
cabs is much more pleasant and frugal nowadays than being stuck
in a gas-guzzler.
In fact, many governments across the world have taken measures to
curb the use of personal vehicles. They are levying heavy taxes
on new cars, which are making household cars costly. For example,
) popular Prius hybrid costs over six times higher in Singapore
compared to the U.S. due to exorbitant tax rates in the country.
Does it Really Matter to Automakers?
What should be the automakers' take on the waning driving boom?
Definitely, it calls for a change in their marketing strategy,
which should be focused more on non-household vehicles or
vehicles required by corporations, government agencies or car
rental companies known as fleets.
The recent trend suggests that the automakers are already
inclined towards fleet sales as the economy recovers and
) sells nearly a third of its vehicles in the U.S. to fleet
buyers while Chrysler sells roughly 80% of its minivans to fleet
customers. However, focusing too much on fleet sales could be
detrimental as they contributed to the Detroit Three's woes prior
to the recession.