NEW YORK -- The internet has wreaked havoc on the music industry, airlines and media, but it just may be doing the same thing to automobiles.
It's a rarely acknowledged transformational shift that's been going on under the noses of marketers for as long as 15 years: The automobile, once a rite of passage for American youth, is becoming less relevant to a growing number of people under 30. And that could have broad implications for advertisers in industries far beyond insurance, gasoline and retail.
Certainly it's hard to believe for anyone stuck in traffic on the way to O'Hare airport in Chicago, a bridge or tunnel into Manhattan, any freeway in Los Angeles, or the newly repaved four-lane highway to a suburban Wal-mart. But look around, and the people in the other cars are likely to be in their 40s or older.
In 1978, nearly half of 16-year-olds and three-quarters of 17-year-olds in the U.S. had their driver's licenses, according to Department of Transportation data. By 2008, the most recent year data was available, only 31 percent of 16-year-olds and 49 percent of 17-year-olds had licenses, with the decline accelerating rapidly since 1998.
Of course, many states have raised the minimum age for driver's licenses or tightened restrictions; still, the downward trend holds true for 18- and 19-year-olds as well (see chart) and those in their 20s.
It's not just new drivers driving less. The share of automobile miles driven by people ages 21 to 30 in the U.S. fell to 13.7 percent in 2009 from 18.3 percent in 2001 and 20.8 percent in 1995, according to data from the Federal Highway Administration's National Household Travel Survey released earlier this year.
Meanwhile, Census data show the proportion of people ages 21-30 increased from 13.3 percent to 13.9 percent, so 20-somethings actually went from driving a disproportionate amount of the nation's highway miles in 1995 to under-indexing for driving in 2009.
William Draves blames the internet. Draves, president of Lern, a consulting firm which focuses mainly on higher education, and co-author of "Nine Shift," maintains that the digital age is reshaping the U.S. and world early in this century, much like the automobile reshaped American life early in the last century.
His theory is that almost everything about digital media and technology makes cars less desirable or useful and public transportation a lot more relevant. Texting while driving is dangerous and increasingly illegal, as is watching mobile TV or working on your laptop. All, at least under favorable wireless circumstances, work fine on the train. The internet and mobile devices also have made telecommuting increasingly common, displacing both cars and public transit.
Blame environment
The environment is the reason Gen Y-ers most often give for wanting to drive less, Draves said.
But he sees the fundamental economic transformation wrought by the internet (and, apparently on the internet; research firm J.D. Power & Associates found that Gen Y-ers don't talk about cars nearly as much as their elders in social media.) This demographic will be working on "intangibles" in professional jobs, not on tangible things that require physical presence, Draves said. "Time becomes really valuable to them," he said. "You can work on a train. You can't work in a car. And the difference is two to three hours a day, or about 25 percent of one's productive time."
Ford Motor Co. sees the trend as well, which is why it has introduced features such as Sync in its cars.
"I don't think the car symbolizes freedom to Gen Y to the extent it did baby boomers, or to a lesser extent, Gen X-ers," said Sheryl Connelly, global trends and futuring manager. "Part of it is that there are a lot more toys out there competing for the hard-earned dollars of older teens and young adults."
Digital technology "allows teens to transcend time and place," she said, "so they can feel connected to their friends virtually." New options like Zipcar also make it easier to do without permanent car ownership, she said.
Millennials "are an important customer to us," said Ford's Connelly. "But we also understand the context in which they use cars has changed. ... It has nothing to do with performance or getting you from point A to point B. It's just a change in what people expect to be delivered."
The economy, rather than any longer-term secular trend, has impacted driving and licensing among younger people, said Paul Taylor, chief economist with the National Automobile Dealers Association.
Unemployment has led some younger consumers to drive less, and the cost of insuring a 16-to-19-year-old driver alone can discourage cash-strapped parents from allowing them to get licenses. State licensing requirements and restrictions by many high schools and colleges on driving are also a factor.
Draves, however, notes that the shift began well before the recession or the preceding run-up in gas prices. The real-estate markets most profoundly affected by the bursting housing bubble -- such as Las Vegas and other Sunbelt metro areas -- are boom towns built around highways with no substantial train transportation.
Real-estate markets that have been less affected or quicker to recover include Boston and San Francisco, which have strong urban rail systems. In New Jersey, Connecticut, Boston, Denver and Chicago, housing prices near new or existing train stations have either been among the first to recover or have seen less depreciation during the bursting of the housing bubble.
In fact, Draves predicts a resurgence of urban living in denser housing surrounding train stations. As a result, suburban shopping malls and big-box stores such as Wal-mart, Target and club stores that rely on people hauling big purchases away in cars stand to suffer.
Before you scoff, consider Wal-mart. Few, if any, retailers are quite as dependent on the car. Wal-mart has yet to find a highly profitable small-store concept that fits densely packed urban areas -- it's disproportionately strong in rural and suburban areas and has had trouble penetrating big cities with mass transit.
When gas prices dropped sharply in late 2007, Wal-mart started posting its best same-store sales results in years. The rebound in gas prices was just as tough on Wal-mart as the drop was favorable. The retailer's year-over-year customer traffic turned negative last year just as gas prices shot past their 2008 levels, U.S. Chief Operating Officer Bill Simon said in a March speech to analysts.
