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The millennials have been known to impact several industries, causing consumer behavior to shift significantly and transforming the business landscape. Years ago, many experts believed that millennials would not be interested in owning vehicles. The top reason backing this forecast was the growing environmental consciousness among millennials, which was believed to be the success driver for ride-sharing services and public transportation.

With car sharing being the most popular transportation solution, the prediction was that vehicle ownership will not be as strong as in previous generations. Studies, however, have shown otherwise. Surprisingly, most research points to the idea that millennials are actually interested in owning vehicles. According to Deloitte, this generation is expected to take up 40% of all new vehicle purchases for the next 10 years.

The big question then is: What is the verdict? Will millennials likely be vehicle owners or stick to ride-sharing? If they will take up a large portion of the purchases, what can dealerships do to attract a larger market from this generation? Read on to learn more about the millennial generation and their attitude towards vehicle ownership.

Who are the Millennials?

Millennials refer to people born between 1981 to 1996 based on the Pew Research Center’s classification. However, others consider the generation’s birth years to be from 1980 to 1994. Generally, they represent about 30% of the world’s population and are known for having different lifestyle preferences compared to the previous generations.

For one, millennials are known for being more vocal, with many wanting to share their opinions on certain topics or products and services from businesses. They are comfortable with the online space, having been exposed to many social media platforms, and thus enjoy looking for content online. YouTube, in particular, is a hit for them as videos appeal the most to their age group.

Furthermore, smartphones have become integral to the millennial lifestyle as they grew up at the time when technology and mobile phones advanced rapidly. A study by Nielsen showed that their generation had the highest mobile penetration rate of more than 85% in the US. Thus, the device serves as a primary source of information for virtually everything.

Millennials have long been considered to be disrupting many norms that have been established by the past generations. From food eating habits to house-buying decisions to entertainment options, several differences distinguish this generation from their parents. Thus, the challenge for the auto industry is determining how to retain and expand the market from this generation.

Millennials Want to Own Vehicles

Contrary to the belief that millennials will be less likely to own vehicles, surveys show that many of them still own vehicles. While it is true that they have a different behavior and perception on transportation, experts say that their choices will not affect vehicle ownership as much as what was once initially thought. According to Knittel and Murphy, who used data from the US National Household Transportation Survey, these life choices are only expected to reduce vehicle ownership by less than 1%.

Other experts explain that millennials are not necessarily aversive to purchasing and owning vehicles, but several generational factors may have transportation implications. For example, this generation is more likely to live in cities and urban areas, which can make owning a vehicle less advantageous. Additionally, millennials are more likely to be single and childless in their life, which can also affect their choice of transportation.

Despite the reasons mentioned above, insurance expert Adam Johnson states that the factors do not necessarily point to a decline in vehicle ownership. It may seem like millennials are not too keen on having their own cars or vehicles, but Johnson emphasizes that this does not mean they are turning their backs on the idea completely.

Despite Ride-Sharing Hype, Vehicle Ownership Remains High

The demographic shift is threatening the success of the automotive industry, with many questions being raised on the future of vehicle-buying given the generational changes. While it has been observed that millennials seem to be buying less cars or driving less frequently, numbers say otherwise.

One survey in 2019 showed that the global ownership of cars is high among millennials, with 75% of respondents saying that they currently own or lease a car. Among this group of respondents, 83% say that they plan to own or lease another vehicle in the next five years. These results show huge potential for dealerships as the trend is expected to continue in the following years.

Several Factors Driving Millennials’ Transportation Behavior

Ultimately, the verdict is that despite the hype for ride-sharing services and a car-free lifestyle, it is clear that millennials still rely on personal vehicles to get around. Several studies and research paint a different story from what was expected and predicted by many experts. Comprehensive analyses revealed that several factors must be considered to understand the shift in their purchase behavior.

Going back to Knittel and Murphy’s study on vehicle ownership across generations, their findings show that millennials own about 0.4 less vehicles than Baby Boomers at the same stage of life. By looking at general identity alone, it appears that younger people are less interested in owning a vehicle. However, analyzing the data deeper, the researchers found that the story was much more complex than it initially seemed.

One significant finding shows that millennials generally travel less than their predecessors, but after considering the number of children, education, and marital status, they end up travelling more miles. Knittel and Murphy concluded in their study that any differences on millennials’ view on car ownership is trivial.

Creating a Pro-Millennial Customer Experience

How, then, can dealerships appeal to millennials? This big question is now at the top of many business owners’ minds, especially since the generation has different preferences than the previous generations. Creating a pro-millennial experience is perhaps the most important step to take to attract more customers from their age group. Here are some vital tips to take note of:

1. Go Digital

One of the first and possibly the most important things to do is to go digital. The millennials are known to be digital natives, having grown up in the age of the internet, so you can expect that they look for most of their information online. When it comes to vehicle-buying, they will likely conduct their research online, looking through various websites and reading customer reviews.

Due to the COVID-19 pandemic and the many restrictions that came with it, customers are also starting to lean towards an online buying process. Traditionally, the process was to do research online, but buy the vehicle physically. Today, however, changes are being made as buyers are now more wary of leaving their homes. Thus, dealers must allow buyers to buy online if they want to keep up with the trend.

2. Promote Transparency

Whether it be buying vehicles or paying for service repairs, millennials want transparency in prices. You must be more direct and honest about prices from the start as they are not afraid to voice out their opinions whenever they can. Aside from prices, the process must also be explained to them thoroughly, so they know what exactly to expect when working with you.

For dealership service centers, it is important to show customers proof of what repairs need to be done. Doing multi-point inspections allows you to create a sense of trust and prove your reputation and credibility. Overall, transparency truly is key, so your goal is to make customers feel that the process, pricing, and whole experience is fair. This way, they will have a good impression on your business and possibly recommend you to other people they know.

3. Use Social Media

Digital advertising presents tons of opportunities to reach more customers. Nowadays, the traditional word-of-mouth is no longer enough. Given that millennials are highly immersed in technology, social media platforms are the perfect way to tap into that market of customers. Surprisingly, many dealerships have yet to harness the power of social media, so doing this can give you an edge over your competitors.

Creating a Facebook page can be a good starting point to expanding your social media presence. Facebook has introduced several advertising tools that can help you target a more specific demographic by filtering factors like age, geographic area, income, and the like. These can help you create more targeted advertisements to ensure that you reach your intended audience.

4. Create Loyalty Programs

Customers are now becoming more selective about the brands they support, so coming up with more marketing practices will be essential. Creating promotions and loyalty programs can set you apart and help you appeal to millennials more as they value personalizations and discounts. However, in doing this, you must think of what is important to your customers.

Millennials are known for being more socially conscious about their decisions, so you can use this to promote your brand further. One way is to look for organizations where you can donate a portion of your sales to, so customers feel like their money is also contributing to a larger cause. Millennials make up a huge market in the overall population, so capturing their interest is essential to widening your customer base.

5. Inject Fun

If you want to make your dealership or service center memorable, you must give customers a reason to keep coming back. You can do this by injecting some fun, making your place look welcoming, greeting customers in a friendly way, and overall creating a warm atmosphere for them. Make your waiting area accommodating by having a TV turned on for entertainment, preparing some snacks and drinks to keep customers busy, and the like.

Transitioning into the Digital Landscape

Transitioning into the digital space is one of the biggest steps that dealerships and service centers must take to attract the millennial audience. You can start with a social media page, but having an accessible website will be useful to provide all the pertinent information that buyers need. You can make your site more interactive and helpful by integrating features like calculators to assist shoppers in estimating costs based on their vehicle needs.

Once you have your website designed and optimized to reach your target audience, you can proceed to use social media for marketing. With social media, you can engage with your customers, update them with important announcements, and keep them on the loop with whatever you have to offer. Social media platforms also have tools that you can use to create targeted ads to reach more users.

Moving into the digital space also means streamlining your operations with technology. Millennials want speed and convenience, so providing them with a seamless online experience is a must. Make sure to update them through texts or social media, allow them to book appointments online and remind them about these, and offer online payment options. There are tons of ways to go digital and enter the online space, so capitalizing on these opportunities is essential.

Understanding how to use various digital tools is now integral for vehicle dealerships. Technology is now a crucial aspect of any business, and now that the pandemic has restricted people from moving around too much, it has become even more important. Currently, many dealerships have yet to adjust to this change since transitioning can come with some roadblocks and challenges. However, doing it as early as possible can give you an edge and set you apart from your competitors.

Contrary to beliefs that millennials are not likely to be vehicle owners, the numbers show that this generation is certainly a promising market for dealerships. Essentially, the verdict is that they want to own vehicles and are still interested in buying them. However, the nuances in their lifestyle and preferences will require businesses to make some adjustments to grow their customer base. Failing to appeal and respond to the unique needs of this demographic will be the main reason why millennials do not shop from your dealership or visit your service center.

How Did the Car Industry Fare Amid the Pandemic? Check Out the 2020 Year-End Review

The COVID-19 pandemic has truly shaken the world, impacting people’s daily lives and disrupting the business landscape in more ways than one. Some industries, like travel and hospitality, have been hit particularly bad due to the need for limited face-to-face contact and interactions. As for most businesses, remote work has become the new normal, with many relying on online communication and collaboration tools.

 

Given that all business industries have been affected by the pandemic, it is no surprise that the car industry also saw changes in sales, consumer behavior, and general trends. The question, however, is how much the pandemic impacted car buying. As the year comes to a close, experts are now looking into how the industry performed compared to forecasts and projections made earlier. Get to know more about how the car industry fared in 2020 with this year-end review.

 

Car Sales Were Hit Hard, But Slowly Rebounding

 

Unsurprisingly, car sales dropped in 2020, especially since people have become more cautious about their spending, with most focusing on essential goods. The large unemployment rate and economic downturn have also lessened the number of people that could afford to get a car. Furthermore, given the quarantines, lockdowns, and mobility restrictions imposed worldwide, the thought of traveling or moving around by plane or public transportation has not been on top of people’s minds.

 

Without a doubt, the automotive industry took a hard hit from the pandemic, with many car dealerships closing down. Sales went down by 71% in China in February and 47% in the US in April. The first two quarters of the year proved to have the most substantial drops in sales, while the third quarter showed some improvement. Though sales were still lower than those from last year, the plunge was not as significant.

 

On the flip side, sales are slowly starting to rebound as the year comes to a close. Though it is still expected that the number of vehicles sold in 2020 will be 28% lower than in 2019, industry forecasts look slightly more optimistic. Sales in the third quarter were an encouraging improvement from the previous two, and a V-shaped recovery is expected as the year nears its end. In particular, trucks and SUVs were observed to increase in demand and take up a larger market share this year.

 

Shift in Consumer Perception and Behavior

 

The pandemic has led to major changes in consumer behavior and perception when it comes to buying cars. As of September, purchase intent was still down by 14% from pre-COVID levels, but this number is an improvement from the earlier months. Two of the most important findings include the increased emphasis on lower prices and digital sales.

 

Consumers worldwide are looking to spend less on their cars as they are now being more careful with their expenses. Quality, affordability, and longevity are some of the top characteristics sought today, with people looking at new and used cars. Due to the current economic situation, many have become more critical and discerning about making purchases, especially for investments like cars.

 

Moreover, the digital platform now serves as an important aspect of driving the purchase funnel. The majority of car buyers start their research with the Internet, emphasizing the importance of dealers having an online presence. ThinkWithGoogle noted that 92% of auto purchasers research online. To add to this, consumers now prefer contactless transactions over in-person transactions, with some willing to pay even more to limit face-to-face contact.

 

With restrictions becoming more flexible and easing, and people slowly starting to leave their houses, many urban dwellers are becoming first-time car owners to avoid riding public transportation. Given that many car dealers and sellers have adapted to the situation by making online car buying possible. These turn of events have proven to be beneficial for the car industry, with demand starting to pick up.

 

Overall, consumers are starting to find more comfort in vehicle ownership, especially with their increased focus on personal health and safety. Less are relying on public transportation, and more are using private cars. Thus, there is certainly potential for car dealers to get back on track and increase their sales with the boost in car demand.

 

Factors Influencing Car Buyers’ Purchase Intention

 

Due to the pandemic, consumers have become even more critical about car purchases. However, what is certain and similar for people in different parts of the world is that most of their focus has shifted to safety being the top priority. Safety and protection are now considered the primary motivators driving purchase interest and intention.

 

EY Global noted that 78% are more likely to use their car for travel, most likely due to the concern of potential congestion in public transit. Americans and Chinese consumers are optimistic about the post-pandemic world. One-third of Americans stating they are likely to purchase a vehicle after the outbreak, and over half of Chinese consumers have the same sentiments.

Another important factor influencing purchase intention is financial concerns. Due to the economic recession, loss of income, or increased expenses, consumers are less inclined to purchase cars during this time. However, automotive sellers can navigate this situation by offering 0% financing, deferred payments, and other protection benefits to give buyers more peace of mind.

 

Search volumes for car and truck deals have increased significantly this year, with most interested buyers being at home and relying on the Internet to get information. One notable finding is the increase in local searches made by consumers. People want to find dealerships near their location to avoid having to go to far places. However, thanks to the digital space evolution, there are now many alternatives to visiting dealerships. Digital showrooms, video conference meetings, and VR test drives are only some of the innovations introduced in the car industry to address this issue.

 

Critical Role of Online Space

 

Interestingly, most car dealers only started to open up to the online world due to the pandemic. Some consumers continue to be apprehensive about going fully online with car buying, especially since getting a car is a big investment. However, the universal consensus is that customers are embracing digitization in certain aspects of the car buying process. The online space has proven to play a critical role in car dealership sales and performance as consumers are adamant about limiting contact.

 

The transition to digital means has resulted in a more convenient buying process with less pressure. Customers can negotiate prices online, do solo test drives, course questions through email. Observably, the purchase journey happens more frequently online, but the actual purchase is still done offline.

 

A survey conducted by ThinkWithGoogle has generated interesting insights on how the digitization of car buying can impact sales for dealers. For instance, 64% of potential buyers who watch online videos stated that they are willing to purchase a car without a test drive with new video formats like 360 videos. The watching time for test drive videos on YouTube has also grown by 65% in the past two years, highlighting the trend with these videos to influence customer purchase behavior.

As a result, brands can benefit from investing in higher-quality and longer content, allowing customers to experience what it is like to ride the car being featured. The key is to make the video real to capture their interest and convince them to purchase a model. All in all, creating videos can get people talking about a particular brand and help them gain recognition. With the hit taken by the industry in the pandemic, this type of traction is precisely what companies need to rebound.

 

Spike in Prices in Used Car Market

 

One of the interesting and surprising turns in the automotive industry during the pandemic would be the increase in the used car market prices. Analysts call it a seller’s market today, as car shoppers are gravitating towards user cars for lower prices and favorable interest rates. With the demand increasing significantly, buyers have less negotiating power, and dealers are less flexible with price adjustments.

 

Though consumers can now find a larger inventory of used cars online, the spike in demand has led to prices turning into a premium. Used car sales started to show promising growth in April and May but ultimately boomed in August and September, when sellers registered the highest inventory turnover rates. The change was so big and unexpected that used car sales today are even higher than they were in the pre-COVID era. Sports cars and trucks, in particular, were found to have some of the highest sales.

 

With this major shift in buyer’s preferences, car dealers can benefit from selling used vehicles at higher prices. As for consumers, doing research will be more critical than ever. Since it is now harder to get lower prices, it is important to ensure certainty before purchasing.

 

Electric and Hybrid Cars in the Pandemic

 

While the demand for new cars has overall decreased due to the pandemic, the electric vehicle segment noticeably did not plummet as much as other car segments. Naturally, sales growth still slowed down, but the projection for the next decade is looking optimistic. Though consumers are more interested in affordability than sustainability, there is still much interest in renewable energy sources.

 

Over time, electric and hybrid cars have grown considerably in design and features, with many new models resembling most drivers’ ideal needs. Electric car manufacturers have also made it clear that more commercial models will be released in the market in the coming decade. That said, the recovery for sales in this segment is expected to be slower in the US as consumers are currently taking advantage of lower oil prices.

 

Ride Sharing in the Post-Pandemic World

 

The ride-sharing service industry is closely related to the automotive industry, and like the latter, this industry has also been severely affected by the pandemic. The public reception on ride-sharing can be viewed in two ways. On the one hand, some people may prefer private rides over public transportation, resulting in an increase in rides. However, on the other hand, some people may generally avoid commute trips for safety reasons, resulting in a decrease in rides.

 

According to Deloitte, 57% of Canadians plan to limit their use of these services, while 62% plan to reduce public transportation use. Other statistics show that 40% of people in the US have started to use less ride-sharing services since the COVID-19 outbreak, while 28% of them noted their distrust in the cleanliness of other people’s cars.

 

Evidently, ride-hailing companies’ main challenge is gaining the consumers’ trust and showing them their adherence to safety standards. Now that quarantines and lockdowns are being lifted in some parts of the world, people are also slowly returning to work or doing other essential activities. As a result, the demand for rides may start to pick up, but the growth may be slow as consumers are now extra cautious of their health and safety.

 

The future of ride-sharing is still not set in stone as there are still many uncertainties. The need for social distancing raises the question of whether the “sharing” concept may still be feasible. Likewise, companies may also turn to additional revenue streams to make up for the expected drop in booked rides. These alternatives may include food delivery services, express delivery of items, and many other similar concepts.

 

Outlook for the Car Industry

 

While car sales are gradually rising and the overall industry performance is getting better, the car buying industry has yet to bounce back to its pre-COVID state. Naturally, the world is trying to transition into the new normal, so it is not only the car industry that is recovering from the effects of the pandemic. However, if there is one thing that is more certain during this time, it is the fact that car sales are transitioning into an online future.

 

Though many customers will still want to see a car in person before finalizing the purchase, several surveys and studies have shown that many aspects of the purchasing journey will likely be digitized in the future. This change is brought about by the heightened awareness for social distancing and limited contact, as well as the convenience of doing car deals online.

 

 

 

COVID-19 has disrupted all industries, and the car industry is no exception. Buyer behaviors have evidently shifted into new priorities, with consumers becoming hyper-aware of their health and safety. While sales plummeted early in the year, they are slowly rising back up as restrictions are starting to ease and mobility is once again increasing. As such, the car industry is expected to make a recovery as the fourth quarter of this year comes to a close.

 

2020 has been a year of massive transitions. For car dealers and sellers, venturing into the digital space is one of the biggest changes, and one that is expected to stay. Even in the pre-pandemic era, consumers have already turned to online means to research about cars and help them make purchase decisions. Now that people are more cautious about face-to-face contact, it is no doubt that the car industry will be seeing digitization in its future.