Like it or not, millennials are growing up, and as they do, they're a growing economic driver for the economy. As they enter their formative years and start building careers, they'll also be making major decisions about buying cars (or not), and that may have a bigger impact on the auto industry than you think.
Here are a few trends to watch for and how transportation companies need to react.
Driving isn't "cool" anymore
As recently as 5-10 years ago, automobiles were a status symbol in the U.S. and around the world. Driving a BMW, Audi, or Porsche to work gave you a level of status, and among friends, it created bragging rights. That's something millennials simply don't care about nearly as much as older generations.
According to AAA Foundation for Traffic Safety, from 2007 to 2011, the number of cars purchased by drivers 18-34 fell nearly 30%, and just 44% of teens got their license in the first year they were eligible. By 18, only 54% of teens had their licenses.
Not only are millennials not driving, they're using ride sharing as an alternative to owning a vehicle. Fleet advertising company Vugo reports that 57% of all ride share customers are between 25 and 34, with just 7% are over the age of 45. Backing up that data, Global Web Index estimates that 70% of ride share customers are between 16 and 34.
These days, mass transit, Uber, and Lyft are easier -- and sometimes safer -- ways to get around for millennials. Another trend driving the usage of ride sharing is where millennials are living.
Housing trends are changing
The move to urban environments is also having a big effect on millennial auto buying decisions. As more people move to city centers, transportation options like public transit, biking, or walking become more realistic than when urban sprawl was the norm. Uber, Lyft, and Avis Budget Group's (NASDAQ:CAR) Zipcar have also made those few instances where city dwellers may need a car more manageable.
While there's evidence that millennials are starting to move to the suburbs, just later than previous generations, the transportation options and habits learned in urban environments won't go away. Spending hours a day in a car to get to work or drive kids around isn't what millennials are used to, and that will change buying trends going forward.
Autonomous driving will change everything
Think of Uber and Lyft as a warm-up for the real transformational shift in transportation: Autonomous driving. And everyone in the industry can see the disruption coming.
Earlier this year, General Motors (NYSE:GM) bought autonomous driving technology company Cruise Automation for $581 million and invested another $500 million in Lyft, both with an eye on autonomous driving in the future. And Tesla Motors' (NASDAQ:TSLA) latest "Master Plan, Part Deux" has autonomy and ride sharing as major focuses. Ford (NYSE:F) has also said autonomous driving is a major focus, although it's kept most of those plans under wraps for now.
What millennials will drive is the adoption of this new technology. They're already more likely to trust a ride sharing platform, and they'll more than likely be early adaptors in autonomous driving systems, whether they're in a ride sharing service or on their own vehicle. Look for this to be the next big change in how we get around.
Automakers can see the disruption coming
Under all of this change in the auto industry are three new companies that have turned the industry on its head. Uber, Lyft, and Tesla Motors have caused more than a little heartburn in Detroit as they upend a business that's been around for over a century -- and they'll continue to drive the industry down a path of innovation.
Amid the disruption, GM, Ford, BMW, and others have been forced to take a proactive approach to adapting to an auto industry future that millennials could play a major role in shaping. And they're looking for very different features in their transportation than their parents.