Is This the End of Cars as We Know It?

Premium Rush opens soon at a multiplex near you.

The action thriller -- with its "Ride Like Hell" tag line -- follows a bike messenger around Manhattan being pursued by seedy types.

A bike messenger? Really?

We haven't entirely lost our appetite for cars. The Fast and the Furious 6 is still slated to hit theaters next year. However, younger viewers seem to be less interested in fancy rides these days -- and it's not just a timely cinematic debut that's nudging me to that conclusion.

A Bloomberg article earlier this month had plenty of tantalizing data points.

  • According to R.L. Polk & Co., just 11% of this country's auto sales in April were to buyers between the ages of 18 and 34. Six years ago that group made up 17% of the industry's sales.
  • The University of Michigan Transportation Research Institute concludes that just 81% of 20-to-24-year-olds had driver's licenses in 2010, down from 92% in 1983.
  • Deloitte studied U.S. consumers born from 1981 to 2001 to find that smartphones are more desirable than cars.

That last point is important. The unsure economy isn't helping, but cash-strapped Millennials are prioritizing their expenditures and costly wireless data plans are winning out over car loan payments and auto insurance.

This is unwelcome news for automakers, and it could even potentially be a sticking point for Sirius XM Radio (Nasdaq: SIRI  ) . Analysts see Ford (NYSE: F  ) and General Motors (NYSE: GM  ) posting declining profitability on flat sales growth this year. Satellite radio is holding up considerably better, as Sirius XM has been tacking on net new subscribers for a dozen consecutive quarters.

Harley-Davidson (NYSE: HOG  ) , on the other hand, is expected to post improving profitability on a 6% uptick in sales this year.

However, the smarter trend would be to bank on the country's youth flocking to metropolitan cities with improving mass transit systems to get around. Car-sharing services will also continue to benefit.

Despite its stock taking a beating since going public last year, Zipcar (Nasdaq: ZIP  ) continues to grow. Membership has climbed 21% over the past year, as thrifty drivers escape the high costs of auto ownership by renting vehicles -- with gas and insurance included -- by the hour.

This could all be an economic hiccup. It's the country's youth that's saddled with steep student loans and fighting to land low-paying jobs. How can they be expected to get around in even secondhand rides? When prosperity returns, maybe they'll stop cheering on bike messengers and swearing off gas guzzlers.

However, for now this has all the makings of a legitimate shift in consumer value perceptions and the prioritization of gadgets over cars as icons of freedom.

Shifting into gear
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The Motley Fool owns shares of Ford Motor and Zipcar. Motley Fool newsletter services have recommended buying shares of Zipcar, General Motors, and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Zipcar and Ford. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (6) | Recommend This Article (8)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 21, 2012, at 1:45 PM, BioBat wrote:

    I suspect there's a simpler answer.

    People in the 18-30 bracket have been moving to and are living in large metropolitan cities (San Fran, Boston, DC, NYC, etc) and don't need cars because those cities tend to have good or great public transportation systems.

    Once they start having kids and realize it's either private school for 12 years or moving to the 'burbs for better schools, cars become a necessity and what was once a no car (or 1 car) family is suddenly a 2 car one. I've seen it happen too many times to count with my friends in the 25-35 bracket to believe it's a coincidence.

    Cars purchases are not going away, they're just being delayed.

  • Report this Comment On August 21, 2012, at 2:11 PM, n8larson wrote:

    Second the urbanization point. Car purchases might just be delayed, but overall the trend in that age group still translates to lower revenue for carmakers compared to the higher millennial ownership percentages of years past. Other potential factors in millennials' decisions to forgo car ownership:

    - Gas prices relative to real wages;

    - Graduated drivers' licensing during the 'formative' years of independent travel (increased comfort with alternatives);

    - Environmental conservation awareness;

    - Link between war and "foreign oil";

    - And, as mentioned, thanks to technology, socializing requires less physical presence than it did in 1983.

  • Report this Comment On August 21, 2012, at 4:26 PM, mehmetst wrote:

    Provocative title with no merits whatsoever!

    This is a mobile nation and we love to get around. Only change which is already happening is a move to cars with better gas mileage thru hybrids and some electric. That shift does not change the need for some sort of musical and audio entertainment, so neither cars nor the radio is going away for a long long time if at all.

  • Report this Comment On August 21, 2012, at 8:57 PM, mrbkush wrote:

    Hourly rentals may well succeed but ZIP won't. The majors entering the market in those few places where ZIP was making a profit will kill this tiny company or make it a bad investment at best.

    Even with the trend to faux social life through texting and FB and the growth of smart phones that doesn't mean that those companies will be or are good investments. Check out RIMM, Nokia, FB, Groupon etc. etc.

    So even if there is a long term sea change in car usage that doesn't mean that ZIP is a good investment.

  • Report this Comment On August 22, 2012, at 2:29 PM, bretco wrote:

    Agree with mehmetst and mrbkush, this article was a total waste of our time and you need to let go of ZIP, it is another good-idea-loser, as it has been since I foolishly (small 'f' ) bought some.

  • Report this Comment On August 22, 2012, at 6:02 PM, lowmaple wrote:

    bretco: You bought at hte wrong time. Get them now while they last!

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