Just over 15 million new cars and light trucks were sold in the United States in 2021, a scant 2.5% increase over the dismal sales numbers of 2020, and still 2 million vehicles fewer than the heady, pre-Covid days of 2019. Guidance provided by industry analysts suggest that the shortfall is a supply problem, not a demand issue. "Demand is not off at all," said Michelle Krebs, executive analyst for Cox Automotive. "What is off is sales, because the inventory doesn't exist." Consumers are returning to dealer showrooms in droves only to find empty lots caused by chip shortages and other component supply problems, which have led to industry-wide production shortfalls. Perhaps unpredictably, Covid has reignited America's interest in their own personal mobility, and maybe just as unpredictably, the generations that everyone thought couldn't care less about driving are leading the way.
Following the initial uncertainty that surrounded the Covid-19 pandemic, which led to a brief reduction in vehicle miles traveled, the virus has restored interest in car ownership in America, particularly among young people. As the pandemic wore on, consumer attitudes, especially those of Generations Y and Z, about where they live, how they spend their time, and how they move about began to shift. Interest in ride-sharing and public transit fell dramatically. People began to leave cities, not just for leisure, but for good. And the generations the auto industry had all but written off as Uber-using, mom's car-bumming, pry-my-Metro-card-from-my-cold-dead-fingers types were suddenly buying more vehicles than anyone else. What's more, it all seemed to happen in the span of about a year.
A pair of studies conducted first in August 2020 then again in November 2021 by YPulse, the leading authority on Gen Z and Millennials, chronicled much of it. YPulse noted last August, just a few months into the pandemic, that young people were already thinking differently about mobility. They were eschewing Uber and the bus in favor of their own rides. 34% of their 1,000-person sample told them that they no longer wanted to ride public transportation, with another 56% saying they wanted a safe form of transportation. This led to 79% agreeing that "Because of Covid, I appreciate my car more." Only 34% said, "Because of Covid, I feel my car is less useful." And 59% of Gens Y and Z said they'd prefer driving their own car to other modes of transportation.
In many cases it was to find some freedom or to get out of cities. 59% of the YPulse sample said that their interest in cars was fueled by a desire to escape home. A Bloomberg study comparing moves made between March 2019 and February 2020 to those made between March 2020 and February 2021 found that 91% of suburban areas saw more moves in vs. out, while 82% of urban areas saw more moves out vs. in. People were clearly abandoning cities during Covid. And as they did, they were buying more cars -- led by young people, whom many believed would abandon cars altogether.
According to JD Power, Millennials bought more new cars than anyone in 2020. E&Ys 2020 Mobility Consumer Index found that 45% of all first-time car buyers are Millennials. YPulse found that 3 in 5 Millennials own a car, and half of those who don't own a vehicle plan to buy one in the next year. So, an industry that accounts for 3% of the U.S. economy, and which employs more than 2 million Americans in the production and sale of new vehicles, should expect some things to change. Because these young people don't look for the same things in cars that their parents do, and they aren't buying them the same way. Other assumptions you might make about them could be wrong too.
So, what matters to these young car buyers? First and foremost, it's not flash. The flashy features that get Boomers and Gen Xers excited don't do a lot for Gens Y and Z. These young buyers, according to YPulse, are more interested in comfort, reliability and fuel efficiency -- in that order. Safety features and a smooth ride round out the top five. While looks matter slightly more for Millennials, appearance doesn't even crack the top 10 for Zs. 73% of the sample said they want their car to be more understated than flashy. Pre-owned and certified pre-owned also lead new cars as young people's primary choice for their next vehicle purchase. In most every respect, these kids are different than their parents.
This difference extends to where they buy, as well. While traditional channels, like car dealers, still dominate among young buyers, more are moving to digital channels like Vroom, Shift, and Carvana. According to YPulse's 2021 survey of 1,450 young people, 20% purchased digitally in the last year. Among, Millennial parents, 54% said they would buy a car sight-unseen, reflecting not only the way they prioritize their time, but also again, the low priority they place on a vehicle's appearance. It's what else these youngsters aren't prioritizing that may surprise you as well.
There are currently around 280 million vehicles in use on American roads today. Only about 2 million are plug in electric. YPulse found that electric does not rank on the list of features that influence young peoples' next car purchase. This matches recent findings from Cox Automotive, which show electric purchase intent of just 10% among those between the ages of 25 and 34. The extraordinarily high cost of these vehicles is certainly one concern for these young consumers, but range and reliability concerns also linger. YPulse found that among Millennials, 66% said that "I am wary of driving in a car that only runs on electric power." So, don't look for Millennials to lead the charge to electrification for the fleet.
Their wariness around electric notwithstanding, the pandemic-triggered explosion in interest in cars and car buying among young people is a harbinger of perhaps happier days ahead than what the auto industry might have expected just over a year ago. Those who profit most, though, will be those who best recognize how different from their parents these young people truly are.