It's been a long time since the auto industry captured the attention of young car buyers. More and more, millennials are choosing to forgo auto ownership for mass transit and ride-sharing businesses that have made it easier to go without a car.
So where should we be looking for automakers to capture the attention of millennials? Here are three places to watch.
Millennials aren't looking for the same things as their parents and grandparents are: horsepower, more seating room, and status symbols. Instead, they (or should I say "we") want to look like they're saving the planet by doing more with less.
Tesla Motors' (NASDAQ:TSLA) Model 3 is being hyped as the first all-electric car for the masses, but it's likely the Bolt will be priced lower and launch sooner. Chevy is shooting for a $30,000 entry price after federal rebates, and with over 200 miles in range, it should have plenty of performance for millennials to get excited about.
By the time the Chevy Bolt is launched in 2017, there will be plenty of charging infrastructure in the cities where millennials congregate to justify mass adoption of electric vehicles -- all they need is the right price. Tesla Motors doesn't offer anything near a price that's affordable for most people under 35, leaving a gaping hole for Chevy to drive through. That's the opening General Motors needs; now it just needs to execute on its EV plans.
Daniel Miller: The moment Ford Motor Company (NYSE:F) announced it would be introducing a turbocharged, four-cylinder EcoBoost engine in the iconic Mustang, controversy erupted. While age-old Mustang loyalists will never consider anything less than a V8 for their rides, it was clear to me that reviving Mustang sales in the U.S. will depend on attracting millennials -- and the EcoBoost is a perfect way to do it.
While two months remain for the 2015 Mustang to chalk up more sales figures, this year has already proven that the iconic ride has new life with younger consumers and could be well on its way to being a hit with millennials across the globe. Through the first half of 2015 the Mustang reclaimed the U.S. title for best-selling sports car, which it last held in 2009. That's because the new EcoBoost option is luring new and younger consumers.
For proof, let's narrow in on one of the Mustang's most critical markets: California. "In Southern California -- Mustang's hottest market -- buyers are younger," said Ford sales analyst Erich Merkle in a press release. "Of all buyers, 40 percent are Millennials, but these younger buyers account for 47 percent of EcoBoost Mustang sales. The EcoBoost option has flipped a switch with young buyers."
Furthermore, in the same market, the "conquest rate" for the EcoBoost Mustang is more than 56%, which means not only is the 2015 Mustang attracting millennials better than in years past, it's attracting consumers from other brands, rather than drivers moving from another Ford vehicle such as the Focus or Fusion.
The Mustang's sales were up almost 200% in the U.S. in September, and 61% through the first three quarters of 2015 -- and if California is any indicator, the Mustang could be a huge hit with millennials across the globe in the years ahead.
Rich Smith: According to the car-buying experts at Edmunds, when it comes to cars, the big trend among millennials these days is leasing. Earlier this year, Edmunds reported that millennials ages 18 to 34 lease cars at rates greater than those of the U.S. population at large. What's more, they're leasing cars nearly 50% more often today than they were five years ago.
Millennial Magazine notes furthermore that when picking a car, this young demographic is particularly attracted to "eco-friendly vehicles that can get great gas mileage" -- in other words, hybrid and electric vehicles.
So which vehicles sit at the intersection of these two trends -- leasable electric vehicles for young buyers just starting out in the work world and driving on a tight budget? Edmunds lists several choices.
The Fiat (NYSE:FCAU) 500e, Mitsubishi i-MiEV, Ford Focus Electric, Nissan Leaf S, and Volkswagen e-Golf (roughly in that order) all lease for anywhere from $169 to $199 per month for 36-month terms. Volkswagen's green credentials have been tarnished, however, which may disqualify the company among millennials. And Mitsubishi, as a brand, is disappearing before our very eyes.
That leaves the Focus Electric, Fiat's 500e, and the Leaf S as the three most likely choices for millennial car-buyers. None incur gas costs. For buyers with great credit scores, all three lease for about the same monthly rate. But among these cars, I see Fiat's $1,999 up-front "at signing" cost on a lease as being perhaps the deciding factor. For car buyers (or lessors) on a budget, I think those four digits -- 1-9-9-9 -- are the ones that will make Fiat's 500e an absolute hit with Millennials.*
*Caveat: Most of these EV deals are available only to buyers in the ultra-"green" states of California and Oregon.**
**Caveat to the caveat: Fortunately, according to a recent report by the American Institute for Economic Research , California and Oregon contain three of the top 10 "most desirable large cities for educated young people."
The market automakers want to own
Millennials are a hard sell for most companies, especially when it comes to cars. But Chevy, Ford, and Fiat may have just what young car buyers want, and that would be welcome news for auto investors.
Daniel Miller owns shares of Ford and General Motors. Rich Smith has no position in any stocks mentioned. Travis Hoium owns shares of Ford. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool recommends Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.