Car Exhaustion: Young America's Love of Driving Has Cooled

50s winged carIn the 1950s, a winged convertible was the ride of choice for the young American greaser. The flower children of the late 1960s and 1970s preferred Volkswagen's Beetles. But more recent generations might be turning their backs on cars altogether. According to recent trends, the hipster era might be swapping an automobile for other means of transportation -- a bicycle, perhaps?

While many think a driver's license is an all-American birthright, this ticket to the open road has been increasingly absent from the dreams of American teens and 20-somethings alike. With the rise of smartphones and the resurgence of our cities, young people have been gradually passing up on getting behind the wheel:
  • Fewer than half of eligible teens 19 or younger have driver's licenses, down from almost two-thirds in 1998.
  • Annual vehicle miles driven by Americans ages 16 to 34 have dropped 23% from 2001 to 2009.
  • Biking and walking as alternative forms of transportation have increased by 24% and 16%, respectively, among the same age group.

The changing habits of Generation Y point to an overall movement away from driving since per-capita vehicle miles peaked in 2004. And while some have blamed the down economy, the shift is even starker among the wealthier members of Generation Y, indicating that this is more of a cultural transformation than a cyclical concern.

It's not just happening in the U.S., either: A study found that seven developed countries including Canada, Japan, and others in Western Europe have also experienced a decline in the percentage of young people seeking driver's licenses.

Why Are Kids Hitting the Brakes on Driving?

There are a number of suspected culprits in this transformation, some more obvious than others.

It's no secret that gas prices have soared in recent years due in large part to the rise of China and other emerging economies. A decade ago, Americans paid between $1 and $1.50 for a gallon, but prices at the pump these days hover around $4. Short-term demand for gasoline is extremely inelastic, but over time, people can make decisions that will cut their gas expenses, such as living closer to their work, telecommuting, or using public transportation more often.

Less apparent is the rise of mobile media, which has made using public transportation easier, more enjoyable and more productive. With mobile access to the Internet and a whole host of other diversions, a seat on the bus can be as entertaining as one's own living room couch or as useful as one's own office. In addition, smartphone apps let riders know when the next bus or train is coming, which helps them save time, plan accordingly, and avoid delays altogether.

Social trends have also contributed to the shift away from driving. The urban decay of past generations has been receding since the 1970s, and young people are flocking to cities across the country, gentrifying neighborhoods that 10 years ago were synonymous with crime and drugs.

The generation that grew up with recycling and concerns about global warming appears to be more environmentally conscious as well. In one poll, 16% of 18- to 34-year-olds said that they drive less to protect the environment. A greater health-consciousness may also be fueling the trend toward biking and walking.

Good News for Some

This trend brings consequences for companies in a range of industries. One winner, a popular brand among millennials, would appear to be Zipcar (ZIP). The company's car-sharing service capitalizes on the shift away from car ownership, and has helped create it, by giving those without vehicles a convenient option for short-term rentals. A growing urban population that's intent on avoiding the hassles of car ownership will be a boon to the transportation disrupter.

The transition to city living and declining car ownership should translate into increased demand for bus and subway car manufacturers since public transportation could receive a boost. Likewise, the makers of more efficient engines for bus fleets, including companies like Westport Innovations (WPRT), could profit from the ongoing trend. Through its joint venture with Cummins, Westport recently received an order for 70 engines from the city of Atlanta.

The traditional automakers aren't rolling over and playing dead, however.

GM (GM) has hired MTV Scratch, a consulting agency that helped make shows like Jersey Shore and Teen Mom smash hits among teens and 20-somethings, to help it find its youthful mojo. Among other innovations, the manufacturer has planned new colors for Chevrolet models, including "lemonade," "denim," and "techno pink."

Still, the spirit of Snooki and Pauly D may not be enough to stop winds of change, and new colors alone aren't likely to sway young buyers who associate cars with traffic jams, pollution and unsustainable living.

It'll be up to carmakers to recapture our youth's imagination, or they may find themselves increasingly being left in the dust.

Motley Fool contributor Jeremy Bowman owns no shares of the companies mentioned above. The Motley Fool owns shares of Westport Innovations and Zipcar. Motley Fool newsletter services have recommended buying shares of General Motors, Westport Innovations, and Zipcar.

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