To Compete With Declining Demand, Automakers Must Drive Beyond Demographics
Automakers had a strong 2013, moving 15.5 million units, according to Edmunds.com. This year is projected to be even stronger.
Does that mean that the predictions about the death of driving are overstated? Not entirely. The trend's here to stay.
There's a difference between the stats on driving and the stats on car sales. Car sales might have upward- pointing arrows, but several stats that underlie car demand are all trending downward: miles driven, percent of teenagers getting their licenses and number of vehicles per household. Let's recap the environment. Four factors are working together to dampen long-term demand and usage.
Economic: Many people can't afford ownership, and those who have cars are replacing them less often. The average car on the road at the moment is more than 11 years old, a number that has been rising since before the recession as the middle class gets squeezed and cars improve in quality.
Technological: This is taking two forms. First from devices and technologies that connect people virtually (smartphones, internet,) so they spend less time connecting physically via automobile. Also there is technology-driven market competition from car-sharing services, increased availability of mass transit, bike sharing and walkability in many cities.
Cultural: Overall, we're becoming less dependent on cars, moving away from a car-centric lifestyle, toward sustainability, a "culture of sharing," etc.
Legal: This is the most overlooked, but since 1996 all 50 states have made it tougher for teens to get and use a driver's license.
A fifth, more demographic-based reason might be the most important. If you look at our largest cities, the rise of households with no cars at all correlates almost perfectly with the rise in single-person households. Whatever the cause, the net result is the same: fewer people driving fewer miles.
The car culture has crashed. So, for car sellers, here's some advice.
Many of these trends are unlikely to reverse, but let's focus on the cultural differences and the key demographic: millennials. To some extent, millennials are different because they can be. Options now exist to enable behaviors that likely would have been common in previous generations, too. More millennials are living in urban areas where having a car isn't a necessity.
In my book "Buyographics," an outgrowth of my research into demographics and consumer behavior when I was Ad Age's director of data strategy, I partnered with Leo Burnett and Ipsos Observer to conduct a study about the differences in the ways millennials view automobiles in their lives. They have much less of a love affair with the car than previous generations did.
For the younger millennials it's about forging that sense of freedom that their parents had. That's a tricky thing to do when freedom comes with a 48-month installment plan. But it's achievable. Quit talking so much about miles-per-gallon -- even though sustainability is important. Talk more about the social aspects. Show the people interacting with each other, sharing experiences and sharing the road.
Demographics will help in one key way. Each day, 12,000 20-somethings are turning 30 and entering those getting-married-having-kids years. Adding a person to a household almost invariably involves adding a car. While nearly one-in-five single-person households is carless, fewer than 6% of two-person households is. For these older millennials, starting families will change their lives in ways they can't imagine. Show them their new reality and how a car can be a helpful part of the equation.
In these Snapchat times, car-buying is still far from a snap decision. Help buyers make it, help them enjoy it and help them see how it not only fits into their lives, but helps connect them to the people and experiences they value.