RIP Automobiles, Hold the Dinosaur Juice

An interesting article appeared in FT.com -- "Young Americans Turn Away from Driving" that supports something I've been thinking for a long time - cars as we've known them are done.  I would not be a buyer of automotive stocks.  In fact, they might make an interesting long-term short.   This position is immediately relevant to the western world, and although developing countries like China, Brazil, India may well have pretty strong auto markets for some time, they are just echoes of the automotive industrial boom.

Here's why cars as we've known them are doomed.

Demographics.  Baby Boomers becoming Aging Droolers reduce and eventually stop driving... plus everyone knows that older folks just don't buy new cars after a point... the old jalopy is just fine.  Even more importantly, the trends in X'ers and Millennials to live in cities, take public transportation, ride bikes, walk and actually SHARE THINGS like cars are killing auto demand.

There is an intriguing psychographic aspect to the falling demand for cars by younger people.  Cars don't have universal cachet the way they used to.  Kids that grew up on the internet, video games and smart phones have a different life focus and orientation than older people who grew up with land lines and the daily admonition from Mom to "go play outside".  Your station in life is no longer signaled by the wheels you have.  In fact it's kind of going in reverse... who hasn't had a chuckle at the some of the auto customizations originating in public housing?  No, having the latest iToy is far more important and relevant.  Cars are a pain in the butt.  They are expensive, costly to drive, costly to insure, they break down and lose value as they age, they are hard and/or costly to park, they get you courtesy notices and fines from your friendly local government, and they tend to embed dumb old technology.  If I need one, I'll borrow it.

If you are an auto maker, the outlook is dismal.  I don't care how big ZipCar gets, it won't replace demand generated by the suburban two-cars-in-every-garage paradigm.

Energy costs.  If you believe energy costs will rise long-term, it's obvious driving will be impacted. Will LNG come to the rescue?  Maybe.  But until something we see a viable substitute for the incredible portability and efficiency of fossil fuels, energy prices aren't likely to help increase demand for cars.

I guess this is the point where we might indulge in nostalgia for the passing of an era.  Go ahead, sit in your shiny baby, smell the leather.  Crank it and gun it... ahh the sound.  Turn on that AM radio and hear those fine tunes... fondly remember everywhere you've gone and everything you've done in your cars (or not)...   OK, time to go.