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Car makers face fact that the thrill is gone for the young

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Does anyone under the age of 40 care about cars? I don't mean care whether the damned thing starts in the morning or how much it costs to fill the tank. Do any of them really have a considered view on the respective merits of Ford over Chrysler? Or if Volkswagen more reliable a brand than Nissan and, given the choice, would they rather own a Porsche or a Ferrari? This is more than armchair whimsy, because in Europe, there are good grounds to believe that real growth in the automotive market has ended, not just this year but for many years to come – and part of the reason is that young people don't care to own cars.

A particularly brutal batch of sales figures for three large Mediterranean markets has prompted warnings among sector pundits that the European motor market has reached saturation. August is normally weak for registrations but French car sales fell by 11 per cent, turning the figure for the first eight months of the year into a 10-per-cent downturn. Also in August, sales in Italy declined by 6.5 per cent and the Spanish market plunged with 18 per cent fewer registrations. It would be rash to make prognostications after a lousy summer, but Europe's car market has been in almost steady decline for five years. Since 2007, annual volumes have fallen by a quarter to 12 million vehicles and the optimistic are now hoping for stabilization rather than full recovery.

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Debt, unemployment and falling real wages are good reasons for people not to buy cars, but even looking out to the end of the decade, Michael Gartside, an automotive industry expert at PWC, the consultancy, doesn't see volumes recovering to their peak levels of 16 million. There are multiple reasons for this, including high levels of market penetration in Europe with about 600 vehicles per 1,000 inhabitants. A strong economic recovery might change affordability and sooner or later cars need to be replaced, but beyond life cycles and cash economics, the motor industry is struggling with a more difficult problem: It is no longer cool to own a car.

It's obvious that teenagers covet iPads, not wheels, but the anecdotal evidence is substantiated by declining numbers of new driving licences. Mr. Gartside points to Italy, where the numbers obtaining licences have fallen by a third since 2007. This can be explained, to some extent, by the expense of driving lessons, but there is no doubt that for many young people, getting behind a steering wheel is no longer one of life's priorities.

Even for those who do bother to learn, ownership of a car is no longer seen by many to be a necessary investment. There are now alternatives, such as car-sharing schemes and services, such as Zipcar, recently taken over by Avis, the rental company. The U.S. firm has implanted itself in Europe, where motor manufacturers are scrambling to set up their own car sharing schemes such as Peugeot-Citroen's bizarrely named Mu, or allying themselves with other car-share companies.

For urban-dwellers in old European cities, ill-served with car parking capacity, these companies are an obvious solution whose time is long overdue. For motor manufacturers, however, the prognosis is frightening. There is mounting evidence from North America that car-share users users tend to ditch their cars or refrain from buying second cars. Zipcar reckons that each shared vehicle can replace between nine and 13 private cars.

It is not all bad news, because car penetration in the emerging markets is a tiny fraction of Europe or North America. Those German, Japanese and U.S. manufacturers that have secured a foothold in the Chinese or South Asian markets will no doubt make a good living. For the rest, there can be no alternative but to fundamentally change the business model. It was little more than a decade ago, that the European motor industry agonized over the best design to attract a new generation of boy and girl racers. Today, it sees a new generation for whom the car is whatever turns up in the parking bay.

Carl Mortished is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights .

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