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Will Gen Y Destroy the Auto Industry?

They’ve killed the music, newspaper and telecomm industries.

by on Feb.18, 2009

Will Gen Y save or kill the auto industry?

Will Gen Y save or kill the auto industry?

Will Gen Y kill the auto industry?

That’s the provocative question posed by a new study from AutoPacific. And before you write that off as preposterous, consider that the generation just entering the automotive market has already driven the nail in the coffin of the newspaper business, all but destroyed the recording industry, and forever changed the way the telecommunications industry functions.

In some parts of the world, we’re already seeing the impact young consumers can have on the auto industry. In Japan, for example, many potential Gen Y motorists are foreswearing the automobile, insisting they’d rather walk, ride a bike, or stick to mass transit.

What happens here, in the U.S., is a critical question considering this is the largest potential market in automotive history, larger than the legendary Baby Boomers. Last year, Gen Y accounted for just 9 percent of the automotive market, but by 2012, AutoPacific predicts, that will jump to a sizable 13 percent, and keep growing from there. Equally significant, 57 percent of this generation are women.

Considering their youth, there’s little surprise that Gen Y buyers have less disposable income to spend on cars than their parents’ and grandparents’ generation. But even so, there are obvious shifts in their early automotive buying habits. Gen Yers are buying more compact and midsize cars than SUVs, especially women in that group.

That reflects the fact that this is a generation that questions authority, the AutoPacific study finds. They’re socially and environmentally conscious. And they demand respect. As you might expect, they dismiss old media, like newspapers and network TV. Their primary influence is what they see and read on the Web.

At a time when Detroit’s automakers are struggling for survival, the Gen Y buyers hold out little hope for salvation. They’re even less likely than Baby Boomers to own a domestic car. Honda, Nissan, Volkswagen and Mitsubishi are brands that play for them. In fact, even some traditional import brands have reason to worry. Toyota seems to be struggling to connect with these young buyers, far more than Honda – and despite the youth-oriented Scion brand.

Price is obviously a big concern for Gen Y, yet image is even more important. Fuel economy matters, as you might expect, but surprisingly, not as much as exterior styling.

That said, expect these buyers to be looking for the latest and greatest in green powertrain technology. A whopping 73 percent would like some form of hybrid-electric vehicle, even better if its capable of using alternative fuels, like E85.

The study suggests American Gen Y consumers aren’t ready to walk away from the automobile, like their cohorts, in Japan. But it seems very likely that their buying habits will be very different from their parents and grandparents, and that could be bad news for Detroit, if not the rest of the auto industry.

Credit: RealEstateRadioUSA for a wonderful pic

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9 Responses to “Will Gen Y Destroy the Auto Industry?”

  1. Bryan Morris says:

    Maybe it’s a bit too deep of an analysis, but what stake does Gen-Y have in GM, Chrysler, and Ford? Are they going to get jobs there that provide them with the kind of middle class life that their grandparents had? Not a chance. Does Detroit make high value, low cost cars that appeal to Gen-Y sensibilities? Nope. If Gen-Y turn its back on Detroit, part of the reason is that Detorit has turned its back on them.

  2. Bryan Morris says:

    Oh and by the way, I think the death of the music industry can be officially ruled a suicide. Detroit, are you listening?

  3. Kyle Rohde says:

    Yep, blaming Gen Y for the death of music and newspapers is a bit short-sighted. What is killing both is their failure to adapt to technology and a changing culture of how we share information.

  4. tdb says:

    Fair comments, Brayan and Kyle, though no generation has ever demanded so much, even us aging Boomers. (And thank goodness the fashion industry rebounded from our early excesses!)
    As to cars for Gen=Y, fair point, though let’s see what happens with the new small models from GM and Ford, Fiesta, in particular.
    Now, my question: as the study I wrote about suggests, Gen Y likes “green,” but that’s not necessarily the actual reason for purchase. So, will some of the new, green models, Volt, for example, or the Chrysler ENVI models, connect with Gen Y buyers?
    Paul A. Eisenstein
    Bureau Chief, TheDetroitBureau.com

  5. guy says:

    All great points. I think it is impossible to comprehend what it means to be born into today’s technology unless you are one of them. I see this generation giving up control fo the car to the tech so they can multi-task, and let the car do the driving.

  6. tdb says:

    Interesting point, Guy, though I think there are plenty of older drivers who would be happy to let the car drive itself, were they confident in the reliability of the technology. Probably Gen-Y’s familiarity with technology will allow them to be more readily accepting.
    Paul A. Eisenstein
    Bureau Chief, TheDetroitBureau.com

  7. Tommy Toy says:

    The auto industry committed suicide a long time ago. They never learned from their past mistakes, that so long as America is dependent on foreign sources of oil, they should’ve designed more fuel efficient and green technology vehicles. Instead, they listened to the needs of the market for larger, more powerful and gas guzzling automobiles. All of us had a handle in this. Gen-Y’s listening, viewing and reading habits have all gone online, so yes, the record industry, film and print media industries have suffered.

  8. Mr. Eisenstein, this is the first story I’ve seen that hints at actual car buying data for Gen Y. So thanks for a great story.

    We predicted 6 years ago that trains will replace cars in our book, “Nine Shift: Work, life and education in the 21st century.” So far, so good.

    Have not seen any evidence or data that Gen Y is buying cars at the same rate as previous generations of young people. If you have more recent or additional data on auto sales to Gen Y, please let me know. Thanks.