How the Auto Industry Completely Lost the Millennials
It’s been a quiet revolution. You might not have noticed (or maybe you have). If you have kids born between 1990 and 1996, there’s a strong likelihood that they -- or at least a lot of their friends -- aren’t driving yet, and aren’t especially anxious to start. The parents get to skate (at least for a while) on things like another car payment, higher fuel bills and an insurance agent who won’t wipe that effing grin off her face as she plans her next kitchen remodel from the commission on the recently engorged premium.
More money in the bank. No worries about the kinds of trouble even good kids can get into behind the wheel. (137 miles per hour in a friend’s ’69 Camaro? Who, me?) More parents sleeping soundly. From where we sit, it's all good.
But this very same phenomenon is keeping the suits awake nights in Motor City. In fact, in motor cities around the globe -- not just Detroit, but Frankfurt, Seoul and Tokyo, too -- all of them were counting on a seamless and continual new crop of freshly minted U.S. drivers who, six or seven years later, would become new car buyers...and then return customers every six to 10 years after that.
I noticed before the economy went south -- and I mean, like seven or eight years ago -- that my kids and their friends weren't terribly interested in getting their licenses. Both now grudgingly say they're going to take the test and start driving. But my daughter is also saying she wants to move to Seattle, bike and take public transport, while my son considers scholarship opportunities at schools in cities where owning a car is simply not practical.
Why has the apple fallen so far from the tree? Not only have I been a car guy since birth; as an auto writer for the last 15 years, there’s been a constant parade of new cars every week for me to drive and review. Beetles to Bentleys, Priuses to Porsches and everything in between. Two a week -- 104 new cars a year. If this had been my dad’s job, I’d have moved my bed into the driveway just so I could look and drool and dream of the day I’d be twisting the key in the ignition. And just about every guy I knew (and half the girls) would be finding excuses to drop by just to check out this week’s rides.
My son thought the Dodge Viper was cool until we had to refill the tank after 70 miles. My daughter demanded to be dropped off two blocks from school rather than be seen arriving in the Rolls-Royce Phantom. They applaud the Prius’ intentions, but find it boring. They worry about making it home in the Nissan Leaf (the car that believes 80 miles on the range indicator minus 19 miles of driving equals 37 miles left to a dead battery) and they want to know why the Chevy Volt costs $40,000 before tax credits.
Just my opinion, but it's a mixture of things, all coming together in a perfect storm. Even in the Boomer generation, the percentage of true gearheads was small. Most of us wanted cars simply to explore our world and connect with friends. The devices we carry in our pockets now can satisfy a big chunk of that. But they don’t mix with driving.
The gearheads are largely extinct, because today you hot-rod a car by swapping out a computer chip or two. And if you're into the tech side of computers, you know they can do so many better, more interesting things than make a car go fast (make that “faster”...a 2012 Toyota Camry V6 goes from 0-60 a full second quicker than a 1972 Corvette with a 454 V8).
And, frankly, a lot of Millennials have got to be just plain sick of the things after spending 16 to 20 years with Suburbans strapped to their asses several hours a day being driven to and from school, shopping and activities. (We also rammed home the point about waste and the environment by buying and driving them in the only contemporary machines heavier than and as thirsty as a 1969 Chrysler Imperial during their formative years.)
All that goes a long way toward explaining why a car isn’t an object of desire in high school and college anymore. It’s not that big a loss for the carmakers (yet), since most students were buying used cars to start with. But the job, paycheck, benefits and stability that previous generations enjoyed immediately after college -- the inner voice of the “responsible adult” who said “I need to build my credit. Buying a new car will do that” -- are by no means certain as this generation comes out the other end of the educational system.
Start with money. Let's say that after college and in their first real jobs, they think they have to have a car. In my mid-20s, I could make $7,000-$8,000 for a new 1984 Honda Civic work. That’s $15,500-$17,700 in 2012 dollars. But I was making $21,000 ($46,500 adjusted), wasn’t starting out with six figures in college loans, gas was maybe a buck a gallon, and the Civic got 44 mpg. Oh, yeah…and I could insure it for about $350 a year ($775 in today’s money).
Today? A 2012 Civic runs between $16,000 and $26,300. So it’s anywhere from a little to a lot more expensive, depending on the trim level. The only model that gets 44 mpg is the hybrid, which is $24,200. The dollar a gallon gas in 1984 translates to $2.25 adjusted for inflation, meaning at $4.50 a gallon now, it’s double what it cost me in real money. And even if you’re sleeping with Flo from Progressive or the GEICO gecko (it’s not mine to judge), you’re unlikely to get insurance on a new car in an urban area (where evidence suggests most Millennials would rather live) in your 20s for $775 a year.
$10,000 would be a stretch for a first-car purchase today. And the closest new car to that is a Nissan Versa with roll-up windows, stick shift and manual locks for $10,990. It's not a bad car for what it is, but $1,000 less buys a wide variety of more interesting used cars, and keeps those buyers out of the new car market for another five years or more.
Waiting to buy -- and then waiting some more
It’s that “or more” part that scares the crap out of the car business, from manufacturers down to dealers. The Millennials don’t have a jones for what they’re selling. There’s no habit ingrained. First cars in high school and college are the gateway drug, and a lot of these folks never inhaled. Many will skip not only the new car, but the used car too. They'll bike or take public transit during and beyond that first gig. (Hell, if someone dropped $10,000 into my lap and I didn't have fires to put out, I'd rather have this year's Power Mac with Cinema Display than anything $10K could buy on a car lot.)
And then comes the stark terror…the wake-up-screaming thought:
What if these people never buy a new car in their lives?
The car manufacturers can't just shrug and say "Caught us. Game over." So they're still trying. But every idea of "what the kids want" adds weight, complexity and cost, making the manufacturers appear even more clueless.
Their best efforts combining efficient size, contemporary design, competitive quality and connectivity (as in Bluetooth, USB, Pandora, Stitcher) unfailingly ring in at about $24,000. If this generation buys cars, that's this generation's third car ($10,000 used car, $17,000 new car five years later, $24,000 new car seven years after that). But that's 12 years from now. Their target 22-year-old will be 34, with different needs (more seats, fewer subwoofers).
Marketing is calling the same play it has for years: Make the kids want the car. How they pay for it is their problem. But Millennials seem, at least in my experience, to be a lot more level-headed about money and a lot less easily influenced by hype and image advertising. And they’re not engaged with the other side of the make-‘em-want-it coin: Car magazines. Go into a teenage boy’s bedroom in the 1950s, '60s and '70s and you’d find Car and Driver, Motor Trend and Hot Rod on the desk, floor or bed (please don’t look between the box springs and the mattress…that’s for other magazines).
When cars sucked in the '70s and early '80s, a magazine editor named David E. Davis, Jr. kept millions of readers subscribed to Car and Driver by making the writing better than the subject. It worked because we still cared about cars; we still wanted to own good, even great ones; and these people got that and were with us. They sold us cars mere advertising couldn’t.
But that was 30 years ago. The Millennials aren't invested emotionally. The big magazines are much smaller now. David E. died a year ago in March at age 80 with everyone on the ladder beneath him still trying to be him. Apart from not caring about the subject matter, it's no wonder Millennials never picked up the car mag habit. Meantime, the big online car sites are either more of the same, but with pixels, or trying so hard to be hip that the pieces may as well be (and in one or two cases, have been) written by going to quickmeme.com.
Still, the automakers keep trying to connect with this generation (dismissively referred to as “Generation Why?”). They're now going to non-automotive bloggers and offering them vehicles to review and trips to preview events for upcoming models (including airfare, hotel and meals), hoping that the credibility of a relationship or tech blogger will somehow translate into car sales.
Will it work? P.T. Barnum might think so, but it's also possible we’ve hit the hype wall. Maybe we’ve arrived at the generation that needs a damn good reason to spend 44.9 cents every time they want to travel a single mile (AAA’s cost-of-ownership estimate for small sedans this year -- multiplied by 15,000 miles, that’s $6,735). Maybe we’ve arrived at the generation where a significant number of people don’t want to be in their own isolation tank an hour or more of every day, but want to be engaged and involved with the people and places around them.
People need cars. We’re a long way from being able to retire them. But until their prospects improve -- and the carmakers focus on their actual price and product requirements instead of PR -- it’ll be a tough sell convincing millions of young Americans they can’t live (for at least a few more years, anyway) without one.