Digital technology has revolutionised almost every aspect of modern life, and the world of the motor business is no exception. The internet has led to the rise of an online ‘sharing economy’ that allows people to rent and share physical and intellectual resources. This cataclysmic change in consumer buying habits has implications for us all, but the effect is particularly significant for the automobile industry.
Some industry experts and social commentators argue that the biggest threat currently facing the European motor industry is a phenomenon known as ‘peak car’, which suggests that the number of cars (and tyres) in circulation will hardly rise any further. There is now a tendency among the younger generations to focus on gadgets and technology rather than being seduced by their first car as a teenager. And as the sharing culture of Airbnb and Uber lead inextricably towards carpooling and ‘on demand’ driving, what does this mean for the future of tyre companies? One thing is for certain – it’s no longer going to be ‘business as usual’. In fact, according to Automotive News, in June 2016 the growth of European car sales had slowed to just 6.5 percent.
The Practicalities of Car Ownership
One of the main issues appears to be that a significant number of Millennials, particularly graduates, currently live in urban areas so car ownership isn’t a priority for many, and for a great many more, owning a car simply isn’t financially viable. Like owning your own home, for the younger generation, car ownership seems very much out of reach. It’s clear therefore, that the auto-industry needs to adapt. But what changes need to be made, and how exactly are brands to appeal to a generation whose interest in car ownership is seemingly at an all-time low?
What we need to remember is that although Millennials aren’t necessarily investing in cars now, they will in the future as their lifestyles inevitably change. When they have swapped urban life for the suburbs and have children that need to be driven to and from school, sports practice and music lessons etc., renting/sharing a car will no longer be practical. Having a family means that your priorities change – this is no less true for Millennials than it was for previous generations. The struggle of trying to balance family life with work and other commitments is a difficult enough task in itself, but as Millennials are now starting to realise, it’s even more difficult when you don’t own your own car.
It is then perhaps of little surprise that recent statistics suggest that Millennial demand for cars is actually rising much faster than anyone anticipated. According to global market researchers, J.D. Power, Generation Y are in fact, buying more cars than the previous generation, with sales rocketing to 27 percent in 2014, from 18 percent in 2010. While it’s worth noting that Millennials do significantly outnumber Generation X by 15 to 20 million people, these statistics demonstrate that the need and desire for car ownership still very much exists, and that it’s a consumer-market that’s just waiting to be tapped into.
Further proof of this is the fact that the growth of car sales isn’t just rising in the European market, growth has also risen exponentially in China and shows no sign of slowing anytime soon. In fact, the growth of car sales in China is still growing so considerably that in Beijing it is difficult to get new number plates allocated to you, even for those who can afford to buy a car. In Qingdao, which is a second tier city in China, they are now considering implementing the odd/even number plate system, which prohibits motorists from using specific thoroughfares on certain days of the week, due to there being such a large number of cars on the roads. So there can be little doubt that car ownership is still clearly growing and forecast to continue doing so – and statistically speaking it’s the Millennial generation who are driving this growth.
Adapting to Meet Changing Consumer Needs
Therefore, it’s more imperative than ever that automobile and tyre businesses focus on building a strong consumer-brand relationship with Millennials to establish themselves as Generation Y’s brand of choice, so that when they are ready to buy, they’ve already decided exactly which brand they’re going to buy from. Generation Y won’t make any purchase unless they can see an immediate and tangible benefit – and more importantly than that, they want to invest in a company with whom they can create a purposeful connection. Therefore, brands need to show that they share the same social concerns as Millennials by focusing on purpose as well as profit, to ensure that they appeal to a generation whose purchase power is still yet to reach its peak.
Indeed, The Deloitte Millennial Survey 2016 found that “Most young professionals choose organizations that share their personal values”. Therefore, brands need to be aspirational by ensuring that their products are at the forefront of technological innovation, but they also need to show that their working practices are economically and environmentally sustainable. They need to show that cars are as necessary, desirable and more importantly, as attainable for Millennials as they were for the generations that preceded them.
Forward-thinking companies such as Zenises in partnership with Alzura have already responded to this change in consumer needs by introducing the Flat Rate Tyre Subscription via the internet. Both innovative and unique to the industry, from just 2.99 euros a month, it is designed to cover all new tyre-related costs, and allows the customer to fit or upgrade tyres without having to worry about expensive on-the-spot payments. It is in essence offering a style of contract that has been popularised by companies such as ‘Netflix’. This concept is of huge appeal to the younger generations because it provides a short-term, cost-based solution to the issues that new motorists encounter, such as the high cost of making initial distress purchases.
Another fast-emerging trend that we are seeing within the auto-industry is that an increasing number of companies are now focusing on developing more environmentally friendly or ‘green’ tyres. Of course, this trend can largely be attributed to brands trying to appeal to the socially conscious value system of Generation Y. However, the introduction of EU labelling legislation in 2012 has also meant that tyre brands have had to focus on developing better quality tyres in a more efficient way, hence the rise of industry 4.0 tyre manufacturing factories. Otherwise known as ‘smart factories’, they are designed to utilise cyber-physical systems and technologies to make the manufacturing process more efficient and environmentally sustainable.
This ‘green’ trend can only be a good thing for the industry and consumers alike, as it means that brands are now creating tyres that have higher fuel efficiency and lower rolling resistance grades than ever before. This not only helps to reduce fuel consumption and CO2 emissions, but also helps to improve the motorist’s entire driving experience due to increased energy performance, which is exactly what Millennials are looking for from the brands that they buy from.
Generation Y will arguably be the most influential consumers in the market. In building this connection with Generation Y through changing business models and appealing to Generation Y values, a company can maximise its chances of longevity and give themselves a huge advantage in an increasingly competitive market.