Peak Autos: America's Love Affair with the Automobile May Be Coming to an End

Inquiring minds note that there are 4 Million Fewer Cars on the Road. It's a sign America's Love Affair with the Automobile May Be Coming to an End.

The U.S. fleet has apparently peaked and started to decline. In 2009, the 14 million cars scrapped exceeded the 10 million new cars sold, shrinking the U.S. fleet by 4 million, or nearly 2 percent in one year. While this is widely associated with the recession, it is in fact caused by several converging forces.

Future U.S. fleet size will be determined by the relationship between two trends: new car sales and cars scrapped. Cars scrapped exceeded new car sales in 2009 for the first time since World War II, shrinking the U.S. vehicle fleet from the all-time high of 250 million to 246 million.

Market saturation may be the dominant contributor to the peaking of the U.S. fleet. The United States now has 246 million registered motor vehicles and 209 million licensed drivers--nearly 5 vehicles for every 4 drivers. When is enough enough?



With four out of five Americans now living in cities, the growth in urban car numbers at some point provides just the opposite: immobility. The Texas Transportation Institute reports that U.S. congestion costs, including fuel wasted and time lost, climbed from $17 billion in 1982 to $87 billion in 2007.

Economic uncertainty makes some consumers reluctant to undertake the long-term debt associated with buying new cars. In tight economic circumstances, families are living with two cars instead of three, or one car instead of two. Some are dispensing with the car altogether. In Washington, D.C., with a well-developed transit system, only 63 percent of households own a car.

Perhaps the most fundamental social trend affecting the future of the automobile is the declining interest in cars among young people. For those who grew up a half-century ago in a country that was still heavily rural, getting a driver's license and a car or a pickup was a rite of passage. Getting other teenagers into a car and driving around was a popular pastime.

In contrast, many of today's young people living in a more urban society learn to live without cars. They socialize on the Internet and on smart phones, not in cars. Many do not even bother to get a driver's license. This helps explain why, despite the largest U.S. teenage population ever, the number of teenagers with licenses, which peaked at 12 million in 1978, is now under 10 million. If this trend continues, the number of potential young car-buyers will continue to decline.

Scrappage rates are easier to project. If we assume an auto life expectancy of 15 years, scrappage rates will lag new sales by 15 years. This means that the cars sold in the earliest of the elevated sales years of 15-17 million vehicles from 1994 through 2007 are just now reaching retirement age. Even though newer cars are more durable than earlier models, and may thus stay on the road somewhat longer on average, scrappage rates seem likely to exceed new car sales through at least 2020. Given a decline of 1-2 percent a year in the fleet from 2009 through 2020, the U.S. fleet could easily shrink by 10 percent (25 million), dropping from the 2008 fleet peak of 250 million to 225 million by 2020.

The United States is entering a new era, evolving from a car-dominated transport system to one that is much more diversified. As noted, this transition is driven by market saturation, economic trends, environmental concerns, and by a cultural shift away from cars that is most pronounced among young people. As this evolution proceeds, it will affect virtually every facet of life.

That is certainly an interesting report and there is a lot more in it that I did not cover. I am particularly interested in the stats on teenage driving and a subject the article did not cover at all, Boomer Demographics.

In regards to teens, parents can no longer afford to buy cars for their kids. And with teenage unemployment at the highest rate in history, kids cannot afford to buy their own cars. That is the dynamic at play, not socializing by text messaging.

What's more important, and something the article did not even address is the massive wave of boomer retirement that is about to hit. Many boomers will go from two cars to one. Or from two new cars to one new car and an "emergency" clunker.

Eventually, upon entering retirement homes, the cars will go altogether.

Let's also not forget about the effect of peak oil.

Finally, cash for clunkers removed a lot of older models from the national fleet. However, it did so at the expense of future demand. Moreover, that future demand is shrinking on account of teenage unemployment, teens living it home, and especially boomer retirement trends.

Peak Autos? You bet.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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