Trend Alert: Millennials Aren’t Buying Cars

I’m an auto enthusiast. I’m also a baby boomer. Maybe that’s why I’m a bit perplexed by a recent Atlantic story explaining that the Millennial generation, i.e., those born in the 1980s and 1990s, “don’t feel a deep and abiding urge to own a car.”

When I was in my 20s, the only person in my peer group who didn’t want a car was my legally blind friend, and that’s only because the state prohibited her from driving due to her visual impairment.

Of course, times change, as do the tastes of a new group of consumers. These days, the Millennial generation just isn’t getting behind the wheel and burning rubber, and that change in attitude could mean big shifts for automakers. It also could mean an investment opportunity for savvy, trend-following investors.

One automaker taking steps to cater to changing Millennial tastes is General Motors (NYSE:GM). A recent article in the New York Times detailed how GM has hired MTV Networks consultants — Viacom (NASDAQ:VIAB) — to help the automaker create products that appeal to Millennials.

More power to GM, as well as automakers such as Ford (NYSE:F), Honda (NYSE:HMC), Toyota (NYSE:TM) and Volkswagen (PINK:VLKAY) if they can tailor a product to address the lifestyle needs of those who have no desire to own a car. But when it comes to investing, I think we should look at companies with a specific focus on the needs of those who choose not to buy an auto.

One such play is car-sharing company Zipcar (NYSE:ZIP). The company went public about a year ago, and since then the shares have had a bumpy ride, falling nearly 46%. Still, Zipcar has an interesting business model that is perfectly suited to city-dwelling Millennials who need a car only on select occasions. The membership-based car-sharing service now serves nearly 680,000 members and boasts a fleet of more than 9,000 vehicles in North America and Europe.

In 2011, Zipcar managed to drive its membership 25% higher, and that could be just the beginning. According to research firm Frost & Sullivan, by 2016 the North American car-sharing market could surpass $3 billion and 4.4 million members, while the European car-sharing market could surpass 3 billion euros and 5 million members.

These bullish projections haven’t been lost on the rental-car industry. Sector leader Hertz (NYSE:HTZ) has developed a car-sharing service called On Demand that functions in the same fashion as Zipcar. Other competitors also are springing up, such as Enterprise Rent a Car’s WeCar and UHaul’s UCarShare.

Although it could be a little early for big profits to be made by catering to Millennials who shun auto ownership, I know I’ll be watching the shift in this demo’s taste for transportation for chances to ride my portfolio higher. Hey, you might not understand kids today, but that doesn’t mean you can’t make money off their quirky tastes.

At the time of publication, Jim Woods held no positions in any of the stocks mentioned in this article. Unlike Millennials, however, he owns several automobiles, including two American muscle cars, a pickup truck and a German luxury sedan.

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