It’s often said that Millennials have a very different view of the automobile – and a new study suggests they are gaining the purchasing power to reshape the auto industry into their own image.
Americans born between 1980 and the late 1990s are expected to account for about 25% of the new vehicle market this year. That means they will generate sales of 4.24 million vehicles, according to data tracking service TrueCar — the equivalent of $135 billion in purchasing power.
“Improving economic conditions are shifting the rhetoric around Millennials and car buying,” said TrueCar President John Krafcik. “They are the largest growing cohort in the market and saying they don’t like cars simply isn’t true anymore. We know having a car means the same thing to Millennials that it does to other generations: independence and identity.”
That stands in sharp contrast to earlier studies that indicated Millennials are, at best, indifferent to automobiles. For example, research by the University of Michigan Transportation Research Institute found that Gen-Y teens were significantly less likely to get their drivers licenses than did Baby Boomers at the same age.
But there’s mounting evidence that, as they grow older, Millennials are following a pattern more similar to that of previous generations. In fact, a new MTV study found that a full 70% of Millennials replied that they “like driving a lot,” compared to 66% of Gen-X respondents, and 58% of Boomers.
“Millennials, like other generations, see car ownership as a way to establish independence,” Berj Kazanjian, Senior Vice President of MTV’s Ad Sales Research, adding they see a car as a way to “craft their unique adult identity.”
(For more on the MTV Millennials study, Click Here.)
There are several reasons why Millennials may be falling back into the fold of a country long enthralled by the automobile.
During the Great Recession, they were among the hardest-hit in terms of unemployment and spending power, at the same time being saddled with record college debt. But unemployment rates have fallen rapidly for Gen-Y, a full 12% between December 2013 and December 2014.
And while the conventional wisdom suggests Millennials may be more than happy to sit in their parents’ basement texting, rather than visiting, friends. The new MTV study found that average 144 miles more behind the wheel each month than do other generations.
(Scion aiming to recapture its youthful allure with Millennials. Click Here for more on its upcoming wave of new products.)
That said, they clearly are enamored with things electronic. Often referred to as “digital natives,” TrueCar notes, they are more than twice as likely as Gen-Xers and Baby Boomers to be early adopters of new technology, “specifically mobile devices.”
Reflecting the fact that they are still beginning their professional careers, Millennials still concentrate in the low end of the automotive spectrum. So, says an analysis by TrueCar, “The average transaction price for new vehicles purchased by Millennials in 2015 should average $31,771, slightly below the overall industry ATP of $32,589.”
Considering their comfort level, Millennials are more likely to use the Internet to assist in the car buying process. The generation made up about 25% of its users last year, but forecasts that will grow to a full one-third in 2015.
(Ford opens new Silicon Valley tech center – targets new tech for young buyers. Click Here for more.)