Is the drop in car sales last year symptomatic of Generation Rent?
Emily Horton, assistant political news editor at The London Student, says YES.
For millennials (known as “Generation Rent”), a car is an unnecessary and impractical expense.
Today’s 18-36 year olds are spending three times more of their income on housing than their grandparents, but often live in worse accommodation. Inflation continues to outpace wages, and we have just endured another substantial rail fare hike.
It therefore comes as no surprise that car sales have fallen; the spending power of this age group is constrained and a luxury item, like a shiny new mini, will be the first thing to go.
This generation is also often characterised as being more environmentally conscious. To improve sales and attract a younger audience, the car industry must focus more of its energy on producing environmentally friendly alternatives. While car sales dwindled, sales of cheaper non-polluting options thrived. Halfords dubbed 2017 the “year of the ebike” after a 220 per cent sales increase.
Until the cost of living crisis is fixed and more cost-effective, greener options are offered, the car industry will continue to suffer.
Read more: Demand for new cars in the UK fell more than a quarter last month
Sanjiv Tumkur, head of equity research at Rathbones, says NO.
UK and US new car registrations suffered their first declines in six years and since the global financial crisis, respectively. However, these declines come after years of annual growth, resulting in less pent-up demand for replacements.
While there’s evidence that Generation Rent is less likely to buy or lease cars than Generation X (born 1965-1979), or learn to drive, this appears most prevalent in urban areas, with more public transport or car-sharing services.
Indeed, a recent study showed that US millennials, aged 21-34, are taking out more auto loans than the previous generation did at the same age, although this might be because auto finance is cheaper or they have less ability to buy outright.
Weakness in car sales can also be attributed to concerns about diesel car emissions and a lack of clarity on the government’s stance. And in the UK at least, there’s also a clear impact from weaker consumer confidence owing to Brexit uncertainty.
Read more: DEBATE: Was the tax hike on new diesel cars in the Budget a good move?