Millennials might return to the car market after all
Smartphones have replaced automobiles as the must-have lifestyle accessory for millennials, or so goes conventional wisdom—backed by some pretty downbeat data from an auto industry perspective.
Not only are members of Gen Y and younger Gen Xers waiting longer to get drivers licenses but the number of them buying cars plunged far more sharply than the rest of the market during the Great Recession. That said, there are signs that they're beginning to return to showrooms and could make up a significant buying force in the years ahead.
What we've seen in recent years is "not a permanent withdraw from the market, it's more of a delay," contends General Motors Chief Economist Mustafa Mohatarem.
From an auto industry perspective, there've been a number of gloomy forecasts in recent months, including a new one from the University of Michigan Transportation Research Institute, or UMTRI. On the whole, it cautions that, "The combined evidence … indicates that, per person, per driver, and per household, we now have fewer light duty vehicles and we drive each of them less than a decade ago," according to lead author Michael Sivak.
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Another new study by Detroit-based data tracking firm R.L. Polk finds that the average age of today's vehicle has risen to 11.4 years, a record and about two years older than the typical vehicle on U.S. roads a decade ago.
But perhaps the most worrisome data have concerned the youngest generation of motorists who, reports UMTRI, are waiting longer to get licensed—if they even bother. Meanwhile, Polk reports that those age 18 to 34 accounted for 14 percent of the new car market in 2008, but just 10.5 percent by 2011.
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The big question is why? A number of studies, including one from the U.S. Public Interest Research Group asserting "the driving boom is over," blame significant social changes, primarily among millennials who are as likely as not to use smartphones to text with friends as actually drive over to see them.
The recession was clearly another problem, considering the huge unemployment rates among young potential car buyers who might also be saddled with significant college debt—which collectively adds up to an estimated $1 trillion—and still living at home where they can borrow a family car.
For his part, GM economist Mohatarem insisted, "I don't see any evidence that young people are losing interest in cars," during an appearance at an industry conference in Traverse City, Mich., this week. "It's not because their preferences have changed," he argued. "It's because of their needs. The income isn't there. The jobs aren't there. They grow older, that changes."
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According to Mohatarem and other, more optimistic industry planners, the industry should gain more traction with millennials as the economy recovers, they gain better jobs and begin paying off debt. Even among those who have embraced the new urbanization trend, the argument goes, there'll be more interest in cars as Gen Y ages and, as a group, enters the family stage of life.
Polk data lend at least a little credence to such a positive forecast. Buyers 18 to 34 years old accounted for about 12.3 percent of the U.S. new vehicle market last year.
But not everyone is buying in. Another recent study by CNW Marketing found that nearly 10 percent of U.S. households are now carless, nearly double the total two decades ago. Retiring baby boomers make up some of that figure, but millennials are the most prominent group.
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"While the recession was in large part responsible for the latest spurt, the trend was already clear," said CNW's research chief, Art Spinella, "A growing number of Americans felt they didn't need or want a personal car."
And that, he and others warn, could be a trend that will continue long after the economy fully recovers and even as millennials start to have a baby boom of their own.
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