How Millennials Are Key to Sustaining the Automotive Industry
For the last 18 months, the international media have widely speculated that the wheels might be falling off the automotive industry. At surface level, the pairing of millennials and the automotive industry seems impossible. On one hand, we have an automotive industry with a sales model that has remained relatively unchanged for decades. On the other, we have a generation that consumes new cultural micro trends weekly and who are meddling with the traditional perceptions and pathways of car investment. However, contrary to rumours that millennials will cripple the automotive industry, in this thought piece we take a look at how millennials may actually be the key to sustaining the future of the automotive industry globally.
The Sharing Economy
Often labelled a generation of commitment-phobes, millennials are much more prone to renting and borrowing from Airbnb, GoGet, Spotify and Uber daily than making longer term purchase decisions. Young adults prefer to hail an Uber within minutes and arrive at their destination without the looming fret of parking availability, take the vast range of public transportation available or even hitch a ride with a family member rather than driving their own car. This growing behavioural trend among millennials of embracing services that provide products without the burden of ownership is defining The Sharing Economy, which is predicted to become an inseparable part of our global economy and in turn has created anxiety among car companies.
67% of Americans have a favourable impression of the sharing economy services like Uber and Lyft. Support among millennials, described as people age 18 to 34, was even higher with nearly three-quarters saying they had a positive view of the industry
— Airbnb, David Binder Research, 2016 (1).
Despite embracing this rent and borrow approach to products once seen as necessities to own, the millennial audience for cars is still there and they’re also more brand agnostic. This agnosticism means that car companies have a chance to reinvent themselves. As it stands, there is still a gap in values between the automotive industry and millennials, and it can be bridged by taking from the sharing economy phenomena.
The core appeal of services such as Uber, Lyft and GoGet for millennials hangs on three principles:
- Simplification: the process is streamlined and accessed readily and in pared-back format via mobile. With 80% of millennials using mobile for at least one part of car buying (2), a simplified and accessible outlook is an expectation.
- Convenience: the particulars of ownership (registration, parking, depreciation) are condensed down to a simple additional cost on a service. With a time-poor and overstimulated audience, car companies can create most value by innovating for convenience.
- Positive Impact: on some level, these companies seek to leverage assets for maximum communal usage, ideally limiting the production of new resources. For the automotive industry, the greatest arms race is towards environmentally efficient technology, and with it, the millennial customer.
These three marketing appeal points are driving many car companies to adopt or invest in the very models that challenge them. Tesla Motors has unveiled that they will be launching their own ride-sharing platform called the Tesla Network, through the use of autonomous taxis. Additionally, it will also enable Tesla owners to rent out their cars as taxis and earn revenue passively, only through the Telsa Network. This also indicates a clear shift from consumers purchasing cars to investing in the access to ride-sharing platforms. Following suit, General Motors have invested in Uber’s rival Lyft with plans to work alongside the ridesharing company on self-driving innovation as well.
Along with the culture surrounding ride-sharing, millennials’ perceptions of owning a car and their pathway to purchasing a vehicle are vastly different to previous generations. However, young adults aren’t completely driving themselves out of the picture by committing to only ride-sharing services for the rest of their lives. Millennials are buying cars, they’re just buying them later. As a generation, they are leaving the nest later, marrying later and entering the housing market later in their lifetime. For older generations, reaching the milestone of owning a car meant freedom, maturity and status, but car ownership carries little of the same prestige for millennials.
Younger generations now see car ownership as a utilitarian purchase, and many delay purchasing a vehicle or even gaining a license. In 2006, Australia’s saw 72.5% millennials driving; a figure that had dropped to 67% in 2016 (3). In the United States, LA Times noted that only about 60% of 18 year-olds have a driver’s license compared with 80% in the 1980’s (4).
“Cars are just appliances, they’re not the symbol of freedom that we had because that was the only way we could get out of the house as kids.”
— Scott Browning, Consumer Services Innovator, 2017 (3)
Whilst millennials see cars as necessities to invest in later in life and a decision that they can easily prolong, the projects* believe that marketing the experience of driving, rather than owning a car as a means of transportation and the outright commitments and hassles that come with ownership is what the industry need to tackle head on in terms of strategy.
“Millennials don’t want to be just fed information and trust it….they need to participate in experiences versus just being spoon-fed something.”
— Lisa Schoder, Ford’s Global Small-Car Marketing Manager (5)
Changing Purpose Pathways
There is also a shift in the way that millennials purchase vehicles. They see the traditional sales as a hassle, involving time and effort at dealerships, along with lengthy price negotiations. Their chosen route involves a heavy reliance on online resources and the use of their mobile devices. Research has shown that overall, 80% of millennials have used their mobile devices at least once during the car purchase journey, compared to only 46% of people aged 35 and over (6). Their demands for a seamless stress-free experience, integrated with online pathways to purchase, is creating a much-needed shift within the industry.
In California, Hyundai have launched Ioniq Unlimited, directed towards millennial consumers, a stress-free online subscription service to purchase and own one of their vehicles. Hyundai’s Vice President of Corporate and Product Planning, Mike O’Brien stated that Hyundai is trying to, “make car ownership as easy as owning a phone.” No negotiations, just one single price that consumers pay each month (7). The used-car industry is also taking stride with San-Francisco’s online start-up “Shift”, which eliminates the entire negotiation process by turning the usual four hours spent at a dealership into a stress-free 45 minute process, where they bring the car (with a set price tag) to you to try out and purchase (8). Similarly, HelloCar, a UK-based online resource, is removing the dealer out of the car-buying process and uses convenience as a touch-point with their home-delivery offerings (9).
So whilst we’ve been told that millennials are triggering the death of car ownership and the end of car culture, they are actually redefining it. This presents a uniquely exciting opportunity for companies willing to embrace audience intuition and adapt their offering and model for the next generation. Here at the projects* we are actively watching millennials embrace the sharing economy, whilst also venture into the purchasing process with more expectations for online technology and experience-led marketing.