Millennials Now Positioned to Save U.S. Auto Market?
With nearly a decade’s worth of articles suggesting millennials never liked cars and are an industry boat anchor in waiting, a new report claims they may actually be the group that saves it. Using the same data from the Department of Transportation/Federal Highway Administration that showed present-day teens holding off on getting their driver’s license, the report placed Bloomberg under the impression that millennials will pick up the slack once they start cranking out offspring.
Millennials never actually hated cars. They’ve simply been, on average, too poor harness the same purchasing power of their ancestors, forcing them to put off major life decisions like getting married, having kids, buying a home and/or purchasing a new automobile. While some assuredly prefer public transit for environmental or social reasons, plenty of this has nothing to do with personal preference. The good news is that this fact appears to be reflected in the number of licensed drivers among their ranks, now that they’re getting a little older.
Analysts at Benchmark Co, a financial research firm, says millennials are getting licensed at the highest rate in 40 years and are on the cusp of outpacing their boomer parents.
“The impact on the auto sector from the millennial generation could be as great as the impression the baby boomers had on the industry in the 1980s,” Mike Ward, Benchmark’s auto analyst, explained in the report. “Over the last five years, there were 15.4 million new drivers in the US, the biggest comparable increase since the 1974-78 period.”
The first millennials reached 35 in 2016, toward the beginning of the auto industry’s record five consecutive years of at least 17 million U.S. vehicle sales. Traditionally, license rates begin to peak when people reach their mid-30s and millennials are no different. They are having babies, buying SUVs and moving to the suburbs.
“We believe underlying demographics support normal demand of 16.5-17 million units annually over the next 5-10 years,” Ward wrote.
Licensed drivers will grow by 12.5 million people in the U.S. over the next five years, Benchmark forecast. By 2025, there will likely be a record 245 million licensed drivers in the U.S. That could result in an extra 3 million vehicle sales a year.
“The key demographic group of people aged 35-44 years continues to grow until 2034 and could provide growth for the industry for the next decade,” the report said.
This may also be welcome news for the demographic cohort succeeding the millennials, Generation Z. They’ve also been putting of major life events. While some of that comes down to the same economic factors (lower pay, higher college debt, etc.) impacting those born a generation later, we’ve also seen the same kind of reporting accusing Gen Z of simply snubbing automobiles and houses. Reasons provided range from environmental concerns to young people simply having a penchant for Uber and apartments.
Regardless, this offers hope to youngsters cursing their own financial situations and desperate to buy a sparkly new automobile — provided they’re patient enough to wait. But it doesn’t create any incentive for automakers to cater to those under the age of 35, which is cause for worry. Some of North America’s most affordable models have already vanished from the market as domestic manufacturers prioritize vehicles with broader profit margins (trucks, SUVs, and crossovers).
What will happen if an automaker falls under the assumption that it’s pointless to even bother trying to court twentysomethings with new product?
[Image: Monkey Business Images/Shutterstock]
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'What will happen if an automaker falls under the assumption that it’s pointless to even bother trying to court twentysomethings with new product?" We will find out because that is exactly what GM, FCA, and Ford have done. Hopefully, these rising star Millennials like big bawdy gas-guzzling pickups and SUVs and podlike CUVs! That would be good news for the Big Three and America, and bad news for Bernie and the Squad. Stay tuned!