This Trend Should Worry Sirius XM and Tesla

This Trend Should Worry Sirius XM and Tesla

If you're noticing less gridlock on the open roads, thank a non-driver.

We're not hitting the streets the way we used to according to a recent Volpe National Transportation Systems Center study, and that's something that could be particularly problematic for Sirius XM Radio and Tesla Motors .

The study shows that the number of miles driven a month by the average driver peaked at 900 nine summers ago. It had fallen to 820 miles last summer, and the declining trend has continued through the first half of this year.

A CNBC story on the trend also leans on a study by CNW Marketing concluding that the number of carless households has doubled over the past 20 years to reach nearly 10% now.

What does this have to do with Sirius XM or Tesla? Well, if we're driving less, this will naturally make paying a premium for radio or an all-electric vehicle a less compelling financial decision. Folks making the decisions to pay for satellite radio or pay a premium for a luxury plug-in electric sedan weigh the time that they will spend consuming the product. If folks aren't driving or buying cars at all, it should make these offerings less attractive.

In the past, driving levels have been hogtied to the state of the economy. If employment levels are humming along and the economy's cooking, there will be more people on the road. They're motoring to work. They're spending more to go out and taking road trips. However, there's a real disconnect this time. Unemployment levels are declining and the economy's taking baby steps in the right direction yet we're driving less?

It gets worse.

The Volpe study shows that there are actually two groups showing an increase in driving activity as senior citizens and middle-aged women are spending more time in their cars. These groups don't exactly ring Sirius XM subscriptions and Tesla Model S sedan purchases to me.

This also means that guys and young drivers are driving even less than the Volpe study suggests since it includes the two groups that are actually spending more time on the road.

What's going on here? Well, it's probably a perfect storm with variable factors coming into play.

  • College grads are leaving school with record student loan debt. Buying a car is a luxury.

  • In a related move, there's an urbanization movement where the youth are flocking back into metropolitan cities with somewhat efficient mass transportation.

  • We also have smartphones. Data plans aren't cheap, and this was an expense that didn't exist for most of us just a few years ago. Ask most people in their 20s if they would rather give up their cars or their connectivity and they'll likely opt to save on auto loan payments, insurance, gas, and maintenance. There's a reason why Zipcar has a presence in hundreds of college campuses with its auto-sharing service.

  • Telecommuting is also on the rise. More people can work at home, and that makes it easier to forgo either car ownership or daily commutes.

These factors, in concert, may not seem to be giving automakers fits these days. Auto sales remain strong, though a lot of that is pent-up demand during the recession that's been gradually fading in the rearview mirror. However, we do see Sirius XM's subscriber rate growing, topping 25 million earlier this year. We also see Tesla's stock at all-time highs, with hundreds of new orders pouring in every week.

This obviously isn't the end. Both companies have outlets for growth even in this environment. Sirius XM has been ramping up its streaming offerings, giving subscribers more value for their plans when they're not driving around if they're willing to pay a little more every month for access. Tesla's been growing at the expense of other plug-in vehicles, taking market share in the electric market that may storm back into favor now that gas prices are on the rise again.

It could still be better, though. The demand for either product would be stronger if men were driving more rather than less.

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