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Are cars just not cool anymore?

Figures just released in the last few days by the European Automobile Manufacturers' Association (ACEA) have shown that European car industry has had its worst May in 20 years, with sales dropping 5.9% on last year's figures to just 1.04 million.

Figures just released in the last few days by the European Automobile Manufacturers' Association (ACEA) have shown that European car industry has had its worst May in 20 years, with sales dropping 5.9% on last year's figures to just 1.04 million. Industry analysts point to the problems with the Euro and the continuing recession in Europe when accounting for this continuing decline but some observers are beginning to detect other factors at work. A new study by industry consultants, Alix Partners, is pointing to possibly permanent, or at least long term, structural changes to the European market. This is particularly worrying to car manufacturers as it suggests that what we are seeing now is the new reality for car sales.

The study points to well-understood economic factors, such as rising unemployment and a drop in disposable income, for the decrease in car sales but also highlights more subtle changes. It points out that Europe has an ageing population and older people buy fewer cars, which is reducing demand. It also exposes a trend among younger consumers to dismiss cars as status symbols and drive less. This last point is particularly exorcising the minds of Europe's car executives. It seems that young people in Europe's urban areas are changing their attitudes to owning cars. They are seen as expensive to own, with sky-high insurance even discriminating against younger drivers. This is working with younger peoples' greater appreciation of environmental issues to make owning cars 'uncool'.

In Germany there has been an almost 30% decline in driving licenses issued to the under 25 age group. Younger people who do drive are more likely to use car clubs and car sharing, while those who don't are contributing to a rise in bicycle usage and public transport. Arnaud Deboeuf, Renault's entry range programme director is aware of the phenomenon, he says: "For many years automotive companies have planned to increase their turnover, to expand line-ups, add content and raise prices. The car was a symbol of status and achievement. More recently things have changed. We have seen the emergence of a large portion of car buyers who no longer show their pride in the most recent or expensive car model, but would rather invest in high-tech or leisure and they are no longer looking for status when they buy their car. They are looking for a 'good enough' offer, a 'good enough' level of feature, a 'good enough' level of comfort."

The UK's car industry has been insulated against this development as it concentrates on luxury sales to emerging markets but it might yet affect markets here.
 

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