THE BLOG
07/01/2011 05:30 pm ET | Updated Aug 31, 2011

Young People Are Losing Interest in Cars, But That Doesn't Mean the End of the Road for Automakers

As expected Cars 2 has hit movie theaters and legions of 7-year-olds have put it on top of the box office. But the world has changed in the 10 years since the first Cars movie, and automotive culture -- the adrenalin rush of horsepower, the thrill of speed and gas-fueled adventure -- is looking more and more like the preoccupation of a bygone era. Lightning McQueen may as well take his place next to Thomas the Tank Engine: The reign of the car as the central fetish of American life is drawing to a close.

Increasingly, young people don't care about cars, according to surveys and forward-looking market analysis. Roland Berger Strategy Consultants recently published a study of the 2025 auto market that documented the car's decline.

For example, among current Japanese students and graduates in their 20s and 30s, cars rank well below fashion, music, and video games in terms of interest. Young Germans are expressing a declining enthusiasm for driving, but an increasing desire to ride a bike or take public transportation. Even In China, where car sales are surging, youths are expected to begin losing their interest in automobiles by 2015.

The U.S. is leading this wave. In 2008, only a third of American 16-year-olds had a driver's license in 2008. Last year, a study revealed that the percentage of new cars sold to 21-34 year-olds had fallen to 27 percent, down from 38 percent in the mid-1980s.

The trend is being called "demotorizing," and it's all about the idea that, while getting around is great, owning a vehicle is not all that exciting. For people under 30, in fact, it's an encumbrance. Their lives are increasingly organized around updating their electronic gadgets, communicating with each other in small, ongoing text-bites, curating their various online identities and migrating to complex virtual experiences. Transportation means just getting to where they need to go, period. Cars are fine, but even better in the minds of young people is choosing a place to live that offers abundant transportation options.

Ironically, as this is occurring, cars themselves are morphing from mechanical contraptions into rolling pieces of computerized technology. But they can't morph fast enough, even as ever more gadget-ized rides, such as the hybrid-electric Chevy Volt and the all-electric Nissan Leaf, arrive in the marketplace. Automakers are currently engaged in something of an arms race to bring more communications and GPS-driven technology to cars. Over the next decade, a vehicle that can't seamlessly integrate with an iPhone or a tablet computer will struggle to sell.

They are all ultimately waging a losing battle, however. For almost its entire history, the automobile has relied on the excitement it embodies. For Boomers and even members of Gen X, cars represented many things, chiefly freedom. If you can remember who Fonzie was, you probably share this collective emotional attachment to convertibles, leather seats, car stereos, spoilers, and acceleration. Automakers have had to introduce new models every four years because consumers have always yearned for the next model, the next ride.

But that charge has been replaced by a cell phone upgrade every two years (and, fairly soon, a new tablet computer on roughly the same schedule). Meanwhile, there's a move afoot to make transportation into a commodity that can be accessed on demand, without any of the responsibilities associated with ownership.

Car sharing is rapidly gaining in popularity -- and investor appeal. Big coastal cities are under increasing pressure to expand their mass-transit offerings, particularly when it comes to connecting urban centers to airports. The overall U.S. auto market may be recovering from the depths of its 2009 collapse, but it's anyone's guess whether it will return to its 2005 pinnacle of 17 million vehicles sold.

There are still rumblings of the car cult in the developing world, where more than 80 percent of automotive production and sales growth is predicted to occur. But as China and Brazil modernize, their economies are leapfrogging whole swaths of the industrial playbook. If it's not necessary to lay telephone cables because people have mobile phones rather than land lines, then why construct a 20th-century-style highway system when the population is migrating to cities and has little use for the open road?

If the youth of China have high-speed rail lines and an abundance of domestically produced, electric "city cars" that can be rented for a few hours or a few days, how can the familiar Western rite of passage of getting a drivers license compete with the average Shanghai teenager's lust for the latest mobile gaming platform? A passport is infinitely more valuable.

The demotorizing trend is already strong in Asia. Over the next 15 years, it will begin to take hold in the U.S. It will be part of a larger movement away from ownership, and it will introduce problems -- not least that in advanced capitalist economies, somebody has to own stuff, and it's generally not good when most of that stuff is in the hands of a select few.

But demotorizing doesn't have to spell economic doom for the auto industry. General Motors and Toyota can just as easily build vehicles that are designed to be collectively owned and shared as they can the personal vehicles of today. A larger problem may be the loss of the financing of personal mobility, something that has generated huge profits for automakers in the past and, not incidentally, helped create a thriving middle class by providing both jobs building cars and the credit to purchase a crucial component of middle-class life that would formerly have been completely out of reach. For many living in poverty today, a computer is.

But not being able to enable the masses to access a middle-class lifestyle is preferable to going out of business. The automakers will adjust -- or be replaced. Perhaps we'll lose something from our psyches as we create a world in which an emotional engagement with what we drive is no longer part of being a mainstream American. But that will be progress, even if it's hard for many people to say goodbye to Radiator Springs and the way of life it symbolizes.