Gen Z is choosing not to drive

Gen Z, the generation born after 1997, appears to be less enamored by the prospect of driving than previous generations, according to consulting firm McKinsey, with potential implications for the future of the car industry.

This group of Americans is less likely to have a license than its older counterparts at the same age. McKinsey points out that in 1997, 43 percent of 16-year-olds and 62 percent of 17-year-olds held a license. But those numbers have dropped substantially, and by 2020, only 25 percent of 16-year-olds and 45 percent of 17-year-olds have a driver’s license, the consulting firm said citing data from the U.S. Federal Highway Administration.

Analysts point out that there could be a variety of reasons behind this trend among Gen Zers. This generation is more environmentally conscious and has access to other, more convenient, modes of public transport.

Gen Z Americans may be less interested in driving compared to previous generations, according to consulting firm McKinsey.
Frederic J. Brown/AFP Via Getty Images

“Maybe they don’t want to drive because they’re looking for a sustainable option, such as public transportation, ride-sharing, or e-scooters,” McKinsey analysts wrote.

The economy may also be another reason that dissuades Gen Z from driving. Inflation has shot up the cost of buying a car. New car prices have soared by 30 percent since 2020, Newsweek recently reported, while used cars have seen prices increase by 38 percent.

Meanwhile, the Federal Reserve’s hiking of rates has pushed up borrowing costs for auto loans. Interest rates on a 60-month new car loan have skyrocketed to nearly 8 percent compared to 4.25 percent nearly a decade ago, according to data platform Statista.

All these factors may make owning a car and driving a less attractive option for Gen Z Americans.

“It’s also possible that a sputtering economy and inflation tinged their entry into adulthood, discouraging spending on big-ticket items such as cars,” McKinsey said.

The signal of a less enthused Gen Z when it comes to driving could affect the car industry. But McKinsey analysts point out that previous generations of Americans had also appeared less interested in driving but went behind the wheel of cars eventually.

“It’s too early to tell whether the no-driving trend will hold with Gen Z, especially given the changes happening in the mobility and automotive markets,” McKinsey analysts pointed out.

The automotive industry is changing with the mainstreaming of the so-called shared mobility market, which includes car ride-sharing, scooters, and in the future, self-driving automobiles.

“The global hailed-mobility market is expected to reach revenues as high as $860 billion in 2030, up from $130 billion in 2019, particularly as consumers continue to look for sustainable and cost-effective transportation options,” according to McKinsey. “And for those Gen Zers who decide that driving just isn’t for them, they can keep themselves busy with TikTok in the passenger seat—or get behind the wheel in the metaverse.”

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