Why are young people less likely to purchase cars, or even have driver’s licenses nowadays? One theory has it that the generation that came of age with the Internet and smartphones thinks cars are pretty lame. Automakers prefer to see the situation differently — that young people today love cars just as much as any other group, but just can’t afford them right now.
The auto industry has been in recovery mode over the past few years. Automakers sold 14.5 million new cars and trucks in 2012, a 13% increase over the prior year, and the highest total since 2007. Projected auto-sales totals for 2013 should easily beat last year too, topping 15 million. Even so, the comeback has been called a “subpar recovery,” and a prime reason why sales haven’t truly taken off is that younger consumers today aren’t buying cars like younger consumers traditionally have in the car-crazed U.S.
Gen Y has been dubbed Gen N, as in Generation Neutral — which is the way some describe how millennials feel about car ownership. Studies have shown that fewer young adults have driver’s licenses, that this group hates the traditional car-buying process more than other demographics, and that they prefer urban living and socializing online and therefore have less need for cars.
The latest data from the University of Michigan’s Transportation Research Institute (UMTRI) bolsters the idea that younger Americans are much less interested in car ownership than their older siblings, parents and grandparents. Bloomberg highlighted data from the study showing that while consumers in the 35-to-44-age demographic were the most likely to be purchasing new cars four years ago, today it’s the 55-to-65-age Baby Boomers buying new cars with the most frequency. In 2011, boomers were 15 times more likely to purchase new vehicles than young millennials (ages 18 to 24), and even consumers ages 75 and up have been buying cars at higher rates than groups ages 18 to 24 and 25 to 34.
The Detroit Free Press focused on UMTRI’s findings regarding young adults who don’t have driver’s licenses. A survey of 600 Americans ages 18 to 39 who don’t drive inquired after the reasons that they don’t have driver’s licenses, and the most popular response (checked by 37%) was that they’re just too busy. Another 32% cited the cost of car ownership as a reason, and 31% said they haven’t bothered to get a driver’s license because of what might be called the “mooch factor”: when necessary, it’s easy for them to catch a ride with someone else. What’s more, 21% of those surveyed said they would never get a driver’s license.
Overall, the impression one gets is that millennials just don’t have the passion for driving and owning a set of wheels that previous generations have had — at least not to the extent that they’ll devote a significant portion of their income to owning a car. “I have a son who lives in San Francisco; when I get a new car and I tell him what I got, he couldn’t care less,” Michael Sivak, author of the UMTRI study, told Bloomberg. “To him, it’s a means of getting from A to B. He goes into great lengths about taking a BART or bus, even though it takes him an hour longer.”
So younger consumers just don’t particularly care for car ownership, right? Wrong, say automakers. “I don’t see any evidence that the young people are losing interest in cars,” Mustafa Mohatarem, GM’s longtime chief economist, said to Automotive News. “It’s really the economics doing what we’re seeing, and not a change in preferences.”
Instead of accepting the premise that millennials see car ownership as “not cool,” automakers are insisting that low rates of driver’s licenses and vehicle purchasing by young people come mainly as a result of car ownership being out of reach financially for this group right now. As the economy improves, and as millennials get a little older and have more need for cars due to work and family responsibilities, auto experts assume that this generation will have to embrace car ownership to a much larger degree. They see the car-ownership alternatives — public transportation, as well as services like ride sharing and car sharing — as having only a negligible impact on the auto-sales business in the future.
That’s why automakers keep spending millions to market to young consumers at a time when, in the short term at least, the money might be better spent trying to woo customers ages 50 and up. In a Bloomberg story about how automakers aren’t giving up on the millennial market, Ed Kim, an AutoPacific analyst, explained, “It may be a long-term endeavor to appeal to younger drivers because a lot can’t afford new vehicles now, but they will a few years down the road.”