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Will a car in every driveway become a thing of the past?

Remember those warnings from a couple of years ago that the age of the automobile was coming to an end? Sales figures from North America for 2013 suggest the death of the car has been greatly exaggerated. But broader trends suggest that auto sales could indeed hit the brakes in the years to come, taking with them their usefulness as an indicator of the health of the economy.

Though sales for auto makers in the U.S. were disappointing in December, missing analysts' expectations, they still capped off the strongest year since 2007. Roughly 15.6 million units were sold in 2013, and the tally is expected to increase to 16 million this year. (Sales in Canada – where the economy suffered less from the financial crisis in the U.S., and where consumers are still leveraged to the gills – came in at 1.74 million new cars, a record figure.)

It now seems evident that the U.S. market has been creeping back up to its long-term average. Sales had plateaued at the level of between 17 and 18 million units per year from 1999 to 2006, before cratering at 10.4 million vehicles in 2009. The recent resurgence south of the border has been led by trucks and larger vehicles. That isn't surprising, given the increased activity in home building and energy sectors, which have boosted the need for small truck users to replenish their aging fleets. As for the rest of Americans, however, the average age of vehicles on the road has grown to 11.3 years in 2013 from 10 years in 2008, according to IHS Automotive. The rebound has been on a slower trajectory than we've seen following past recessions. Still, pent-up demand and stabilizing economic conditions were going to spur on vehicle sales eventually.

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So much for the naysayers, right? Not so fast. While sales are not falling off a cliff at present, the longer-term picture faces challenges. "The trend rate we thought was normal is probably a little lower [going forward] than we thought a short while ago," Royal Bank of Canada's chief economist Craig Wright said.

A key factor in this has been the huge drop-off in the number of young people under 40 – particularly those under 20 – who have pursued a driver's licence in the past 30 years, in the U.S. and several other countries. According to one notable University of Michigan study, 87.3 per cent of 19-year-olds had driver's licences in 1983, whereas in 2010, only 69.5 per cent did. As aging baby boomers leave the roads, this could point to a deterioration in sales.

Furthermore, one of the hottest industries of late is the car-sharing business, led by such upstarts as Zipcar and Getaround. If the trend goes mainstream, ever larger numbers of people in urban centres will be putting fewer cars to greater use, exerting downward pressure on new vehicle sales. That will likely also be hastened by the continuing decline in good middle-class jobs, a trend that has emerged over the past few decades. As for promises of a shift to vehicles powered by energy sources other than gasoline – and perhaps a second automobile revolution – the transition is in its very early stages.

Secular demand for automobiles will not fall off sharply any time soon. The infrastructure of developed and emerging nations ensures that billions of people will still need to get around by car for the foreseeable future, particularly outside of dense urban areas. Longer-term, several trends suggest automobile sales may not be as strong a bellwether of North American economic growth as has they have been for much of the past century, when owning a car was almost an essential part of participating in modern society. But that shift is well down the road.

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More


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