Tech trumps cars for Gen Y

Gen Y people can think of ways other than driving a car to capture freedom. Photo / File
Gen Y people can think of ways other than driving a car to capture freedom. Photo / File

Carmakers are looking for ways to lure back younger buyers

The American car industry says it is concerned that financially pressed young people who connect online instead of in person could hold down peak demand by two million units a year.

In the United States the rate of sales to buyers aged 18 to 34 declined to 11 per cent in April this year, down from 17 per cent for the same age group in April 2007, before the recession, says automotive data and marketing solutions leader R.L. Polk.

And consultants Deloitte say that the Fourth Generation (4G) trumps V8 among the 80 million US consumers born from 1981 to 2001.

Although the car is still a gateway to independence, Generation Y has more ways to connect with the outside world than young buyers of past generations.

"A car is a symbol of freedom," says Alexander Edwards, president of the automotive division of researchers Strategic Vision.

"But unlike previous years there are many different ways that a Gen Y person can capture that freedom."

At stake is whether the recovery in vehicle sales is restrained by Gen Y.

US sales of cars and light trucks rose 14 per cent to 8.43 million in the first seven months and are on pace to total more than 14 million this year.

That would be the best year since 2007 but it would nevertheless lag behind the annual average of 16.8 million from 2000 to 2007.

A combination of lower wages for the youngest workers and the generation's tendency to favour gadgets over cars may cap average auto sales at about 15 million a year, says Dan Luria, a labour economist at Michigan Manufacturing Technology Centre.

The peak for sales was in 2000 with 17.4 million cars and light trucks.

"These days technology not only competes with cars," Luria says, "it competes and wins."

The percentage of people aged 20 to 24 who hold drivers' licences dropped to 81 per cent in 2010, down from 92 per cent for the same age group in 1983, says Michael Sivak, a researcher with the University of Michigan Transportation Research Institute.

But carmakers have attempted to attract Gen Y buyers for years. Toyota created its Scion brand for the group and Ford used social media outlets to promote its introduction of the Fiesta sub-compact.

General Motors has set up programmes to train dealers in ways to attract young buyers.

"It's no longer a foregone conclusion that we will be able to sell cars to a large and emerging demographic," says Mark Fields, Ford's president of the Americas. "If we're going to continue to grow as an industry and as a company then it's really important we reach this consumer."

Young people have been slow to buy cars in weak economies, and have settled on used models or alternatives to driving. For most Gen Y buyers, also known as Millennials, skipping a vehicle purchase is preferable to foregoing technology.

Smartphones, laptops and tablet devices compete for their dollars and are higher priorities than vehicle purchases, says Joe Vitale, an automotive consultant with Deloitte.

"A vehicle is really a discretionary purchase and a secondary need versus an iPhone, mobile phone or personal computer."

Jordan Wesolek, a Blue Man Group front-office worker from Chicago, says he pays US$300 ($370) a year for internet service and is saving his extra cash for a US$2200 MacBook Pro laptop from Apple.

The 23-year-old sound technician, who rides a bike to work, isn't thinking about buying a car any time soon.

"Right now I couldn't do it," says Wesolek, who recently invested almost US$500 for a new wheel and other parts to refurbish a bike he originally bought for US$120. "And the desire to own a car is just not there."

Technology, a weak economy and urban living are leading to fewer young people obtaining licences, Sivak says.

"The cultural trend is a consequence of the available technology.

"Given that you now have the option and it is convenient, the internet is replacing physical contact."

Wesolek, who relies on his iPhone to communicate on the job, says it's not practical for him to buy a car. Something from his budget - rent, utilities, food, internet, student loans - would have to give.

"I would say, definitely, a data plan and all that would play a bigger role for me than actually driving a car," Wesolek says.

Millennials living in big cities with reliable public transit don't see the need for owning a car, even for weekend trips to visit friends or family, Luria says.

Those who do drive can turn to companies such as Zipcar that provide hourly car rentals.

For Gen Y consumers who can afford to shop for vehicles, many want their cars to be connected to the internet.

They're willing to pay more than US$3000 for in-dash features and connectivity capabilities, the Deloitte survey indicates.

For Bryan Espey, 26, who works in marketing for a check-printing company in Kansas, the decision between a 2012 Ford Focus Titanium and a Volkswagen Golf TDI came down to which made it easier to play the Spotify internet music service from his Android phone.

He chose the Focus.

"I would prefer a car-less life," says Espey, who needs a car for his 30-minute commute to work. "I don't enjoy paying for it.

"It's kind of a necessary evil."

- Auto News

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