Thursday, February 27, 2014

When Will Lexington Cool Off Its Auto Love Affair?

In April of last year it was reported that European car sales were continuing their slide to a 20-year low. 

“The car boom in Germany has come to an end,” said Hans-Peter Wodniok, an analyst at Fairesearch GmbH & Co. “People have stopped buying cars as consumers are much less confident of the future. It was said that the western European passenger-car market was on track last year to hit levels last seen in 1993. This was also about the time that some folks were trying to convince me that our car driving habits were being adopted by the Europeans.

If things have not improved since then, I ask you, just what are the Europeans doing instead of buying cars? The Germans have a long history of being ardent automobile enthusiasts and some of the finest driving machines have been produced by the Germans, but if they are not buying cars to drive, what are they doing?

Germany has become the world's biggest user of one-way car sharing plans. That is where people can find a vehicle using their smart-phone, drive it across town and leave it there without having to return it to a central base, much like the bike sharing programs being started in Washington DC and New York.

In America, we have other alternatives to auto ownership which are emerging. A ride-sharing company called Zipcar and a ride-booking service named Uber Technologies are beginning to appeal to a new generation of drivers, or in many cases riders. Many more young people just aren't pursuing drivers' licenses these days.

In 1983, 87.3 percent of 19-year-olds in the U.S. held a drivers license, by 2010 it had fallen to 69.5%. Automobile ownership, which once equated to a “rite of passage” has dropped to the point that almost one in 10 households don't have a car.

Some of this shift comes from changing attitudes on oil consumption for environmental, political and economic reasons. A new survey from Intel has found that 44 percent of people would prefer to live in a city with automated "driverless" cars than to have some car makers' high-cost product.

The transportation mode which ushered in an era of personal mobility in the last century may now no longer the most convenient conveyance. "The key question is: Do you sell cars or do you sell mobility?" said Tim Ryan, New York-based vice chairman of markets and strategy for consultant PricewaterhouseCoopers. 

Although Germany's new vehicle registrations fell below 3 million last year, continuing a two-decade decline, Chinese consumers continue to have a voracious appetite for automobiles, as more of the country's 1.3 billion people climb the economic ladder. China, in 2009, surpassed the U.S. as the world's largest auto market while struggling with urban gridlock and growing pollution that has created a brown haze over many large cities. In Shanghai, new license plates are auctioned off for an average of $13,400 per tag to slow auto sales and cut pollution..

So, somewhere between the German automotive market and culture and the Chinese market and desires is the U.S., wavering between falling miles traveled per person and a recovering auto economy. The sad fact is that the recovery may be losing steam before rebounding fully. Ford and GM are expecting a basically flat 2014, with low single-digit growth in revenue. Their Oriental competitors may actually see a slight decline.

Will our Millenials follow the lead of their counterparts in Europe and embrace the car-sharing and transit oriented lifestyle? Many indicators say that they will, especially in America's major cities. It will not be easy since many states and communities are still working under antiquated Public Services Commission rules. Pittsburgh's mayor is now asking that the Pennsylvania PSC allow for car-sharing in his city.

The for-hire ride market has been raising tensions between cities or states and the changing Millenial attitudes. The auto industry may also be applying some pressure since it is estimated that for every car that is part of a vehicle-sharing program, the auto industry misses out on 32 sales. Perhaps based on their two decade experience, Germany's powerful auto industry now is betting big on the car sharing idea and not just for short trips within cities.

America's century-long love affair with the car is cooling and young people are three times more likely than older generations to abandon their vehicle if costs increase. Some in our community will rush toward the new technology and many will stay with the old stand-by modes. The question remains as to how do we plan for the results of this trend and how soon will its effects reach Lexington?

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