Why Car Companies Should Be Extremely Nervous About Millennials


A study from Zipcar found that young people have a much stronger relationship to their phones and laptops than their (or, more likely, their parents') cars (Zipcar)

Generation Y -- aka Millennials, aka people between 18 and 34 -- don't care about driving nearly as much as the generations before them, according to a new report from Zipcar. There are many reasons why, but they boil down to less money and more options.

The less-money part is pretty straightforward. Cars are expensive -- after houses, they're the second biggest spending category among American families. But one-quarter of young people have moved back home during the recession. Their unemployment rate is significantly higher than the general population, and those who have jobs are earning less than they were just four years ago, adjusted for inflation. They're not making nearly enough money to keep up with their parents' driving habits.

On top of that, young people enjoy more options in two distinct categories -- transportation and leisure -- that are competing with our car time and car money.

First, transportation. The housing bust has slowed development of the suburbs in many cities, particularly the northeast, where metro centers are now growing faster than the 'burbs. As more young people avoid expensive gas by moving to urban and urban-lite areas, they'll drive less and subway/bus more. Where your driving miles are lower, car-sharing companies like Zipcar are more attractive as cheaper alternatives to an owned vehicle.

Second, leisure. It seems weird to say that the Internet could possibly "replace" the car. But it's not weird to say that we spend more time connecting with friends on the Web, or that we spend more time on e-commerce sites than in brick-and-mortar stores. The marketplace of things to do under your own roof has exploded in the last decade, and you can see how having more things to do at home makes you less likely to be on the road, which diminishes the appeal of a car -- or, at least, a new expensive car.

You might say: Derek, take a breath, you're projecting the decline of owned autos based on a study from a car sharing company! And yes, Zipcar has a stake in the future I've illustrated. But the biggest car companies see the same future. When Jordan Weissmann and I reported a magazine column on "cheap" Millennials stiff-arming the auto industry, we heard from Sheryl Connelly, the head of global consumer trends at Ford. "You no longer need to feel connected to your friends with a car when you have this technology that's so ubiquitous, it transcends time and space," she said.

So this isn't just the future Zipcar is hoping for. It's also the future Ford fears. That's reason to believe it's more than wishful thinking.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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