limits the financial freedom and
economic willingness of many to
take on the costs of owning a car.
In what is a huge shift from
the past, a study from the AAA
Foundation for Safety reported
that those in the 18-34 age group
in the U.S. who had previously
rushed to get wheels as soon as
possible after turning 16 are now
buying 30% fewer cars with less
than half even getting a driver’s
license in the first year eligible.
It is difficult to see The
Millennial Cliff reversing so
that higher sales result for
the automotive industry with
demographics, urbanisation,
societal shifts and environmen-
tal protection efforts developing
against it. The soaring costs of
higher education also hamper
sales growth for cars in a criti-
cal demographic. Much of the
sales strategy of the automo-
tive industry had always been
to bring a young buyer into an
economy ride who would then
buy more expensive vehicles as
they became more affluent over
the years. That will not work
when the Millennial Generation
of today is renting rather than
buying even an economy car.
There is certainly nothing wrong
with the quality of the product:
The motor vehicles of today are
better and better-looking than
those of the past. In addition,
the financing plans are far more
accommodating, too.
The global recovery from
The Great Recession is releasing
pent-up demand for new motor
vehicles, which has resulted in
the present bull market for the
sector.
But that demand will soon
be sated. Even with the repressed
need finally being unleashed
as economies around the world
1
Padgett, Marty,“April Auto Sales Stay Aloft, Thanks to Long Term Loans,”The Car Connection, May 1, 2104.
2
Mauldin, John,“Outside the Box: The Demographic Cliff and the Spending Wave,”Mauldin Economics, January 15, 2014.
3
Dobbs, Richard, et al,“Urban World: Cities and the Rise of the Global Consumer Class,“ McKinsey Global Institute, June 2012.
4
McLain, Sean,“Why the World’s Cheapest Car Flopped,”The Wall Street Journal, Oct. 14, 2013.
5
Johnson, Ian,“China Releases Plan to Incorporate Farmers into Cities,”The New York Times, Mar. 17, 2014.
6
Boston, William,“Next Big Thing in China? Used Cars,”The Wall Street Journal, May 7, 2014, p. B9.
7
Ibid.
8
Ross, Darren,“Millennials Don’t Care about Owning Cars, and Car Makers Can’t Figure Out Why,”Fast Company.
recover, 18 to 34 year olds still
have less of a desire to join the
car culture. They are refusing to
obtain driver’s licenses, least of
all buy a new motor vehicle. It is
unlikely that alternative energy
cars will reverse the trend as
those still have to be registered,
insured, parked, maintained and
financed. For the motor vehicle
industry, The Millennial Cliff
comes with a flashing warning
“danger” sign on the edge.
As part of The
Millennial Cliff,
there has also
been a societal
shift towards
what has been
called the
“shared economy.”
