For most automakers, baby boomers are the proverbial 800-pound gorilla that still drives the industry, the biggest buying group in terms of raw vehicle sales and, in particular, the generation spending the most for each of the cars they buy.
But manufacturers are preparing for the arrival of a new group that could soon not only outnumber the boomers but also demand some big changes in the type and size of vehicles the industry produces. Generation Y, also known as the millennials, offer both tantalizing opportunities and major challenges, according to executives at this year?s New York International Auto Show.
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Millennials are becoming ?the new face? of American auto buyers, asserted Jim Farley, Ford Motor Co.?s global sales and marketing chief, during his keynote speech at the auto show. ?And we?ll be surprised,? he added, ?by what they choose.?
According to U.S. Census Bureau data, there are more than 80 million American consumers approaching age 30, which means that each year millions more are moving into the new vehicle buying demographic. Indeed, according to the recent ?Gen Y in the Driver?s Seat? study by consulting firm Deloitte, they already represent about 40 percent of the nation?s potential car buying population ? though they are still well outnumbered by boomers when it comes to the number of new vehicles sold each year.
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In fact, that ?potential? doesn?t necessarily translate into the same mindset toward buying and owning cars that was seen when boomers came of age. Nearly a third of American 19-year-olds haven?t bothered to get a driver?s license, according to a new study, continuing a downward trend that finds fewer and fewer millennials plugging into the American car culture.
?Virtual contact reduces the need for actual contact,? suggested Michael Sivak, co-author of the study by the University of Michigan Transportation Research Institute. ?We found that the percentage of young drivers was inversely related to the availability of the Internet.?
In 1983, well before the advent of texting, e-mail and online gaming, 83 percent of American 19-year-olds were licensed. By 2010, found UMTRI, that was down to around 70 percent.
Another study, jointly carried out by General Motors and Viacom?s MTV Scratch unit, found just 32 percent of 3,000 American millennials surveyed saying they were interested in cars ? though it also showed 69 percnet viewing the purchase of a car a ?milestone? in becoming an adult.
Which brand millennials turn to is also up in the air. Auto data-tracking service Edmunds.com finds that Japanese makers have steadily lost ground with millennials at the expense of Detroit and Korean makers ? a sharp reversal of the trend when baby boomers were first entering the new car market.
?Don?t think we have the millennials figured out," Ford senior marketing executive Amy Marentec recently said, but she added that domestic automakers are beginning to show signs of ?cracking the code.?
The market data suggest that younger buyers are generally more interested in green technology than their parents? generation, something that could drive demand for hybrids, plug-ins and battery vehicles. On the other hand, the higher cost for such technologies is so far restricting sales.
Millennials are downsizing, several executives said. That?s one of the reasons why Audi has such big hopes for the next-generation A3 sedan it showed reporters during a sneak peek in New York. It will become ?the third leg? for the brand, said Audi of America chief Scott Keogh, and should drive other makers to rethink the future of their bigger products.
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Keogh also emphasized that the new generation of buyers ?isn?t willing to compromise,? even though they?re on a tighter budget than boomers. They expect that even entry-level products have a much higher level of refinement ? and advanced features like infotainment systems capable of accessing social media services.
The new generation has ?an incredible taste for luxury,? echoed Ford?s Farley, adding that millennials now expect to get more for less, no longer expecting that they have to pay a substantial premium for high-line brands. ?And as the price of luxury cars drops,? he said, ?don?t be surprised if they make luxury cars their first (new vehicle) purchase.?
For the industry, delivering on those expectations could be challenging. It could strain resources in the short-term, but those brands which can meet the demand could come to dominate the new generation much as marques like Toyota, Nissan and Honda were the favorites of the boomers.
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