Auto sales statistics in the last several years have revealed an alarming trend: millenials, the youngest adult generation, aren’t buying. Only 12% of the auto sales in 2012 were attributed to them.
Since automotive companies’ strategies have always been to appeal to young drivers, securing their loyalty to a particular brand at a young age, this creates a challenge. Some vehicles introduced in recent years, such as Honda’s Element, were designed to appeal specifically to young drivers. To Honda’s surprise, it wasn’t millennials lining up to sign on the dotted line — but, rather, baby boomers.
Instead of continuing to waste money on marketing assumptions, the auto industry would do well to determine the root cause of the decline in millennial vehicle purchases.
Here are a few key reasons why millenials aren’t buying cars.
One of the most obvious reasons why millennials aren’t purchasing vehicles is that they can’t afford them. Most millennials have very little savings, massive charge card and student loan debt, poor credit, and poorly-paying jobs.
This isn’t to say that a portion of them won’t eventually buy when things look up; they’re just not in the financial place to purchase now. This actually demonstrates surprising responsibility on their part; they’ve learned from the mistakes of generation X that if you can’t afford it, don’t buy it. Although auto dealers can create more favorable loan conditions to lure millennials, money isn’t the only reason they’re not biting.
An increasing number of millennials are moving into cities and areas where public transportation, biking, and walking are the preferred modes of transportation. City life isn’t conducive to vehicle ownership, because of poor gas mileage and the hassle and cost of parking and storage (not to mention the potential for theft). It’s simply cheaper and more efficient to use other forms of transportation.
Millennials aren’t traveling as much as they used to, either. Thanks to the wonders of the Internet, more millennials are able to work from home (or anywhere they can take their laptop). They’ve also become accustomed to the convenience of online shopping for everything from books to music to groceries.
Many millennials aren’t even bothering to get drivers’ licenses, since they don’t expect to be driving. In the past, having a driver’s license wasn’t just a necessity — but a rite of passage for most teens. Now, it’s something they don’t have the time or interest in pursuing. This could be a bad sign for the auto industry: financial hurdles can be overcome, but the loss of a generation’s interest in their product is a tremendous obstacle.
Besides creating vehicles that are more compact, hip, and gadgety, the auto industry is starting to hit on one of the best marketing conduits: social media. Millennials respond more to advertising through social media than any other channel; if they’re going to buy a car at all, Twitter, Facebook, and similar sites will definitely influence their choices.
What It Means
The decline in automobile purchases by the younger generation has many worried for the state of the industry and for the economy — since millennials are also delaying home ownership and other large purchases.
Some think this spells serious trouble for the industry’s future, while others who study millennial habits insist it’s simply a phase.
Millennials are just taking a little longer to “grow up,” and are waiting longer to get married, have families, and purchase homes and vehicles. And by focusing more on their career, finances, and life path, millennials just might end up with more purchasing power later on in life.
What do you think? Is this just a phase, or is it an indication of the auto industry’s decline?