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Millennial Consumers Pose Challenge of a Lifetime

Millennial Consumers Pose Challenge of a Lifetime

By Jeff Youngs, March 05, 2012
There is no bigger long-term priority for the auto industry in the United States than figuring out the preferences of Millennials (also known as Generation Y, and Echo Boomers)-a powerhouse demographic cohort that is about the size of the previous most populous generation: their parents, the baby boomers.

Because Millennials represent such a huge portion of the potential auto-buying American public for the next few decades, OEMs must successfully address their needs, wants, and turnoffs to convert today's nascent recovery into solid long-term growth.
"They're hugely significant in terms of raw numbers alone," said Sage Marie, Honda's manager of product planning in the United States. "Capturing their business and ensuring their loyalty is crucial for the future."

But Millennials also have proved to be the first generation to defy the auto-industry marketing wisdom of at least half a century. Now of driving ages from 17 to 34, Millennials tend to be less interested in driving per se or in the traditional attributes of automobiles, especially power, and more interested in the environmental credibility of vehicles and in their emergence as rolling platforms for cell phones, iPods and other infotainment devices.

"They're less inclined to get a driver's license as soon as they can," said Larry Dominique, Nissan's former vice president of advanced product planning and strategy in the United States. "They're looking at vehicles more from a practical than an emotional sense."

Millennials are marked by other differences from preceding generations, too. "They may end up worse than the previous generation from a net-worth standpoint," noted George Rogers, president and CEO of Team Detroit, Ford's advertising consortium. "And they're more socially concerned, about the environmental aspects of vehicles."

Besides placing a huge emphasis on connectedness and infotainment, this generation also demonstrates a marked departure in their overall attitude toward automotive transportation than their parents held.

The notion of Little Deuce Coup becoming a hit song with Millennials today, as it was for their boomer parents in 1963, is laughable, because their relationship to and with cars is very different.

"They care about infotainment technology more, and the thing they care about less is that whole culture of gasoline and horsepower," Rogers said.

Eric Wong, a manager in Mazda 's product planning and strategy group, said that "there's less emphasis on straight-line speed and horsepower, and [they believe that] it's more cool to get a car that is more fuel-efficient."

Styling remains important to Millennials, and there's a huge customization trend among them that speaks to their interest in parts of the automobile other than the USB port.

But another aspect of Millennials is that they're less involved emotionally with the notion of a vehicle. This trend is advanced in Japan, said Nissan's Dominique. "The United States is not anywhere near that, and it will be a long time before we are," he said. "But there are signs that we are chipping away at the emotional side of cars."

Millennials also demonstrate less raw enthusiasm for driving than any generation since the popularization of the automobile. The notion of camping out in the parking lot of their local Department of Motor Vehicles office on the eve of their sixteenth birthday, as many of their parents did, is alien to most in the new generation.

Several tendencies of Millennials feed this trend. For one, "teens are able to connect in so many other ways" than physically, through their smartphones, Honda's Marie noted.

Yet, because friends tend to be important to them, Millennials spend a lot of time in vehicles as passengers, not as drivers. "They tend to travel in packs," said Michael Sprague, vice president of marketing for Hyundai in the U.S. This trend has even prompted some American municipalities to pass ordinances regulating how many pre-adult individuals can be in a vehicle.

And as generations of young people before them, adult Millennials tend to cluster in big cities, where mass transport is usually available. Also, they are entirely comfortable with an innovation newly available with their generation: car-sharing services such as Zipcar.

This also is the generation that is staying at home with their parents longer than any Americans before them. "It's influencing vehicle purchase behavior because a lot of Millennials are saying, 'I don't have to buy a fancy car or one I'm attracted to emotionally, because I can always borrow Mom and Dad's.'"

Yet Millennials face unique economic challenges: Economists roundly assert that they are the first generation of Americans who cannot count on their collective economic achievements exceeding those of their parents. "They're almost all of driving age by now, but a lot of them still aren't in the [automobile] market because of the economic conditions," said Honda's Marie.
Millennials' "ability to start moving forward economically has been delayed," Dominique added. "Their purchasing power may be extremely big later, but they're not following the growth timeline that boomers or Gen Xers followed.

So there are a lot of open questions. One of them is, if they're delaying leaving home for financial reasons, are they leaving home when they do with a lot of money in the bank? We're not sure yet."

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