True or false: A licensed driver aged 18 to 24 is about eight times more likely to purchase a new car than a licensed driver 75 or older?
The answer is: false. In fact, it is just the reverse: Licensed drivers 75 or older are approximately eight times more likely to purchase a new car, pickup truck, sports utility vehicle or minivan than 18- to 24-year-olds.
This is one nugget from a series of reports authored or co-authored by Michael Sivak of the University of Michigan's Transportation Research Institute. The reports offer a glimpse into the driving habits of Americans, information useful to those considering investing in carmakers and the companies that supply them.
Among other things, Mr. Sivak reports that:
• Between 1983 and 2011, the percentage of persons aged 20 to 24 who had a driver's license dropped from 91.8 percent to 79.7 percent.
• Per licensed driver, the group of licensed drivers most likely to purchase a car in 2011 included those aged 55 to 64. Four years earlier, the most likely buyers were drivers aged 35-44.
• The total mileage logged annually by all U.S. motorists has dropped about 5 percent since peaking in 2006.
• The distance driven per person, per licensed driver, per household and per registered vehicle all peaked in 2004, about four years prior to the recession. Of these four measures, the only one that has a realistic chance of eventually surpassing its 2004 record is the miles driven per registered vehicle, Mr. Sivak said.
He believes that although the recession contributed to these changes after 2008, the fact that the trends began in 2004 indicate demographic and other factors are at work. One possible contributing cause Mr. Sivak cited is the increased use of public transportation. Ridership on public transit has increased more than 9 percent since 2004, according to the American Public Transportation Association.
Mr. Sivak said other possible factors include the increase of workers who telecommute, more people living in urban areas and the aging U.S. population.
"Older drivers tend to drive less," Mr. Sivak said.
So how do these figures inform the views of auto industry investors?
If people drive less, they will be able to hold onto their cars longer, said John Tumazos, a Holmdel, N.J., metals industry analyst. "If people drive their cars 10 percent fewer miles, their cars will last 10 percent longer, and they'll buy 10 percent fewer."
U.S. sales of cars, pickup trucks, sports utility vehicles and minivans peaked in 2000 at 17.8 million. The figure dropped to 10.6 million in 2009 and hit 14.8 million last year. Market researcher LMC Automotive predicts sales will hit 15.6 million this year, about 12 percent below the peak.
People are purchasing smaller cars that contain less steel and other materials. Many are also holding onto their cars longer.
"I used to trade in cars every three years or so. Now it's more like six years," said Christopher Wiles of Rockhaven Capital Management in Mt. Lebanon.
He said the fact that people are driving less has implications for many companies, including beverage makers that sell to gas stations and convenience stores.
John Frankola of Vista Investment Management in Pittsburgh was not surprised that 75-year-olds are more likely new car buyers than younger people. After all, the oldsters are not saddled with the $26,600 in student loan debt that the average 2011 graduate left school with, according to the Project on Student Debt.
"So many young people have to defer purchases because they can't get that first job or the first job doesn't pay well," he said. "Even if they got their first job, it would be difficult for them to get financing."
The auto industry trend that Mr. Frankola gives the most weight to is the fact that government regulations will require fuel efficiency standards to increase substantially by 2025. Those standards and the desire of consumers to purchase more fuel-efficient cars will put a premium on investing in companies that best satisfy that demand, he said.
It could also spur the rise of natural gas and electric vehicles, he said. Ford announced last week that it will offer a natural gas-fueled version of its F-150 pickup truck.
As important as it is to identify trends, investors should not stop there. Mr. Frankola said they must also determine how early they are in identifying the trend, something investors who chased tech stocks in the months before the dot-com bubble burst did not do.
And just because there's a trend doesn't mean it is a sure thing, he cautioned. Hydraulic fracturing, or fracking, for natural gas worked out so well that it encouraged many companies to chase the business. That caused the price of natural gas to fall, hurting those who invested in natural gas producers such as Chesapeake Energy.
"Everything worked out as planned for them except the price of natural gas," Mr. Frankola said. "Sometimes you can be right about the trend but wrong about the investment."mobilehome - bizopinion
Len Boselovic: firstname.lastname@example.org or 412-263-1941.