According to a new report by global business-advisory firm AlixPartners LLP, changes in the driving habits of the aging Baby Boomer generation are having a significant effect on the recovery of the auto industry.
Although sales of light vehicles have increased over the last year, the report found that the percentage of American motorists is not keeping pace with population growth.
AlixPartners managing director John Hoffecker said, “Boomers are driving less than other people their age were in 2001. A smaller percentage of people are driving. The number of miles driven also has flattened out and we don’t see it going back up.”
The report also found that younger Americans are less enthusiastic about owning a vehicle than they were a decade earlier. In fact, the apathy about driving among so-called “Millennials” is so prevalent; the report dubbed them “Generation N” for “neutral about driving.”
The report also echoed the findings of other recent studies that more Americans are buying smaller vehicles. AlixPartners expects the trend to continue through 2016 and attributes the shift to higher fuel prices and an influx of better designed, more feature-rich compact models.
In a comparison of the North American and European markets, the report found that U.S. automakers are leaner and more competitive. Since 2007, 18 North American manufacturing plants have been shuttered and production has risen to 89 percent of capacity. In Europe, only three assembly plants have been idled since 2010, and production has fallen to between 75 percent and 80 percent.
North American automakers have also reduced their dependence on fleet sales to about 20 percent of production.
Hoffecker said, “The industry is acting in a good, rational way to build production… and meet natural demand. Automakers in the U.S. are in much better shape than they were before 2008.” And yet, the changes in behavior combined with the sluggish U.S. economy present ongoing challenges for domestic automakers.
“It’s long been a truism that if people don’t have jobs, they don’t buy cars,” says Hoffecker. “Given lingering low employment in this country, plus the fact we estimate that in the last decade incentives ‘pulled ahead’ more than 18 million units of sales, we see true, underlying demand being a big issue for the industry going forward.”