Millennial future Car Ownership

Millennials will buy cars in the future. And it’s because of their past.

Millennials are disrupting the car industry with a shift towards alternative models such as pooling, sharing and borrowing cars. But this is likely to only be a phase. Sociological theories explain why this generation’s past means they will buy cars in the future.

Millennial Car ownershipSelf-driving cars, electric cars, sharing cars. The future of cars is changing. Nobody really knows what the cars of tomorrow will look like, but we do know they will be different. And who is driving this change?

Millennials.

Dubbed the “Netflix generation”, young people are rejecting traditional forms of ownership. They expect the freedom to choose the right product to suit their needs at any given moment and get rid of it as soon as they no longer need it. Unsurprisingly, this attitude is changing the way they see cars as well. Why should they buy one expensive car that cannot adapt to their needs and spends most of its life parked. Ideally, they’d have a small car for their commute, a campervan for adventures across Europe and a Station-wagon for the weekly shop.

And this terrifies the big players in the car industry who rely on selling cars to cover their high production costs. But should they really be worried?

Millennials Taking Over Consumer Power

Well, they would definitely do well to listen to Millennials. They are soon coming-of-age as a fully-fledged consumer group that industry just can’t ignore. By 2020 their spending power will exceed $14 trillion, making them the most powerful consumer group on the planet.

Millennials consumer spending

These 20-30 somethings are now at the stage in life where they are starting to get ‘real jobs’; and they have the levels of disposable income that allow them to buy more than cheap beer and kebabs. Yet, they’re not buying anywhere near as many cars as their parents. 29% less in fact. And their love of technology is pushing them towards car-sharing schemes, ride-hailing and public transport – and away from the car dealership. In fact, Deloitte’s Global Automotive Consumer study shows that up to 60% of young people consider not owning a car.

Young People consider not owning a carNaturally, the big players of the automotive industry are worried that they will fade into irrelevance while more modern, agile companies like Uber, Tesla and Lyft take over the market.

But, does all this really signal the beginning of the end of car ownership as we know it?

In short, no. And there are two simple reasons why:

Human nature and economics.

To Buy or Not to Buy

Buying a car is a big decision. It costs a lot of money and it will have a big influence on the sort of lifestyle you lead. Such a large decision calls for rational thinking, considering all the options and making an informed decision based on your personal circumstances. If they could get away without a car, many Millennials would consider a different lifestyle and rely on public transport.

Well, they claim they would not buy one. The reality is quite different. In reality, very few of us make these big decisions based on our actual experience; we don’t really consider our current needs and lifestyle. If we did, a lot less of us would buy cars.

So, what do we base these decisions on?

French Sociologist, Pierre Bourdieu, explains that the vast majority of our decisions are based on our previous experiences. Our previous experiences frame what we think of as ‘normal’ or ‘rational’ and have a huge influence over the decisions we make today – so much more than we think.

“In a determinate social formation, the stabler the objective structures and the more fully they reproduce themselves in the agents’ disposition, the greater the extent of the field of doxa, of that which is taken for granted.” P. Bourdieu

 

Cars Are Still Our ‘Normal’

So, when most millennials think about themselves in the future, they picture themselves bringing up a family, they’ve got a good job and they have their own home. This picture is not based on their current situation but on their image of their own upbringing. Most of us grew up in a family home where our parents went out to work, we played in the local park, and crucially, we had a car.

And this image determines how we see ourselves in the future. If you grew up in a family with a car, that is your ‘normal’. You saw your parents go off to work in the car every morning, they ferried you to your sports events and you went on family holidays in the car. Project yourself into the future and these are the things you understand as part of a normal family.

So, it makes perfect sense that when you start to have kids and build a family yourself, you’ll think you need a car. How else could you give your kids the ‘normal’ upbringing you had? Now, all this sounds very far from making a sensible, informed decision. Most of us would like to think that when the time comes, we would be more rational than that. And, of course, you would be right to an extent. You’ll probably be rational when it comes to which car to buy – you’ll look at fuel consumption, environmental impact, boot space and so on to make sure you buy the best car for your situation.

But you’ll still buy a car.

I’m just as guilty as anyone. I recently had a baby and started a new family. My family and I live in the middle of a Swedish city with very good public transport connections and a very convenient, cheap commuter train to my workplace. We could live very comfortably without a car – in fact we have done for the past two years.

And what have I just bought? A car.

Sure, I did a lot of research. I made sure I got the best value for money and most suitable car for a small family. And I justified the need because our wider family live far away, so we need to travel to visit them more often. But, again, we could easily take the train on the rare occasion we actually have the energy to make the journey. But we don’t. Because we have a family now. And a good parent should have a car!

The Economics of Car Ownership

This argument is also supported by the economics of the millennial situation. Yes, we are worse off than our parents at the moment thanks to the global recession (not avocado toast). But, it is also predicted that Millennials will become the wealthiest generation and their spending patterns are different to those of the older generation.

millennial future ownership avocadoWhilst the baby boomers invested all their money in housing, millennials are investing in education first – to the tune of $370 billion in the US alone. Before getting a job and ‘settling down’ they’re educating themselves and squirreling away their savings. So, it may take a little longer to get there, but Millennials are actually following a similar trajectory to their parents. And because they will be more educated, they will generally be better off.

Young people Old people debt difference

Not only will they be buying cars, then. They will also be better off so they will actually be able to buy more expensive cars!

The Next Generation Will Change Car Ownership

Those that may genuinely stop buying cars are the following generation – gen Z – because they are growing up in a time where cars are not the norm. They are growing up in a world now, where disruptive technology is challenging the status quo and exposing them to new alternative models. And they are young enough to be impressionable to these alternatives. They are learning about the rules of family life, and how a car fits into that life in a time when owning a car could mean lots of different things – sharing, leasing, subscribing, pooling.

In short, Millennials will be buying cars in the future. They just need time to get their affairs in order and start a family. So, in essence, the big car companies have time on their side. They don’t have to worry about young people not buying cars – not just yet anyway. The truly big disruption will come with Gen Z who can imagine a future without cars.

Billy Jones,
Analyst

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