TODAY’S YOUTH MAY NOT BE BUYING NEW VEHICLES IN LARGE NUMBERS BUT THEY WILL BE TOMORROW
Among the many issues over which auto industry-watchers and media members serially wring their hands when talk turns to what’s happening in the car world, not many have received more attention than the notion that young people refuse to buy new cars. They are too caught up in other technological toys, goes the argument, to have much need for wheels. Such complaints, this (still relatively) young observer has noted, usually carry the dismissive and antagonistic “kids today” tone beloved by people of a certain age since the beginning of recorded history.
Questions of inter-generational tension notwithstanding, the issue, such as it is, merits consideration. Are smartphones replacing cars for everyone born since 1980? Will tomorrow’s consumers surf to work on gravity-defying tablets?
I was recently treated to a rant from a U.S. blogger that the industry is “completely screwed” because “the poor and the young” are not keeping up their end of the bargain in driving demand for new cars. This person went on to fret that because “younger people aren’t buying cars on the same level as their parents,” the industry may be in serious trouble.
NO “GOLDEN AGE”
When was this “golden age,” I found myself wondering, in which young people bought more new cars than their parents? Out of all the new cars ever sold in Canada and elsewhere, how many were purchased by 20-somethings? The fact is that the rare 25-year-old who does own a car today is not driving around a 2014 model that still smells of fresh and pristine upholstery. He’s driving almost everyone’s first car: a pre-owned model with more life experience than its owner that hasn’t seen the inside of a factory since they were in their teens or before. This was as true 50 years ago as it was 20 years ago, as it is today.
There’s never been a time when “the poor and the young” have accounted for an important share of new car sales. While new cars are often marketed at a younger demographic, only older consumers can afford to buy them in large numbers. I once heard this referred to as the industry’s “dirty little secret.” To me the notion that 45-year olds make more money and buy more new cars than 25-year olds is hardly a secret. It is not particularly dirty either.
Poor people more often than not remain poor and that is a huge problem well beyond the scope of this column. But young people don’t stay young forever. Once they hit their early-30s, a vehicle usually becomes a necessity if it has not already. Furthermore, once they own a car, they almost never go back to not owning one. A typical 30-year old entering the world of car-ownership typically has 40 or more years of driving ahead of him. This represents many hundreds of thousands of kilometres and a great deal of new car demand.
SMARTPHONES NOT A SUBSTITUTE
The notion that cars are marginalized by the proliferation of smartphones and tablets has also always seemed fantastical. In economics you’ll learn of substitute goods: when the price of one increases, so does the demand for the other. Think butter and margarine; Coke and Pepsi; petroleum and natural gas. That these products are substitutes for one another is intuitive and straightforward. But I can’t drive my BlackBerry to visit friends across town or bring the kids to soccer.
And yet the idea persists. There are now more 20-somethings in Canada than there ever have been. New car sales are likely to reach a new record this year. These two are not related, of course: most of those cars are being purchased by people born well before 1980. But in ten years’ time today’s 20-year-olds will be having kids and buying cars just like 30-somethings (myself included) are today. A decade or two further down the road they’ll be in their prime earning years and creating even more demand for new vehicles, just as their parents are right now.
We’re not “completely screwed,” then. Kids grow up. Their needs and means change as they get older. Kids today are grownups tomorrow.
