Disrupting automotive through adaptation of technology business model – How to attract MILLENNIALS

n the US 28% of cars are leased. While it is uncommon to lease inexpensive vehicles and family cars, close to half of all luxury cars are. That percentage is only higher in one other car-segment: electric vehicles (EVs): In the first 3 quarters of 2015 75% of new EVs have been leased!

The most common explanation is that EVs are still too expensive to buy. Another popular reason is that customers do not trust the durability of electric powertrains and lithium-ion battery technology. Finally, customers claim that driving range might be an issue and thus prefer leasing over buying (more on my thoughts on driving range anxiety)

All 3 reasons play a major role. All of them have been researched by J.D. Power back in 2010. However, they don’t sufficiently explain the high lease rates among EV customers today. Here are three insights why car leases are 3-4x more common in the EV segment and why car ownership is becoming rare among young customers.

GenY (Millennials) Adapts New Purchasing Habits

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Average Earnings for Young Adults in $2013

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Cars Sold in Millions per Generation

Car leases are already the most popular way of „purchasing“ a luxury and electric vehicle (EV). First, I documented why millennials/younger customers are more likely to lease. Second, I described why technology changes can lead to reduced interest in buying. Finally, I tried to proof that smartphones have given users the ability to experience freedom without owning a car.

These 3 points lead to an assumption: GenY, as the second largest car buying generation, is leading the ownership disruption in the car segment. They buy fewer cars per 1000 citizens, have the highest % of leases and have different expectations for cars (in terms of technologies and features). How can car manufacturers attract GenY and bring driving back?

Lets take a look outside the car industry. How are technology firms attracting young customers? The smartphone market, like the car market, has taken a hit in the last few years. The handset replacement cycle has slowed down significantly. It is the slowest since the introduction of the iPhone in 2007. In 2014, 143 million mobile phones were sold in the United States (-15%). Of them ~90% were smartphones. 2007 users upgraded their phones every ~19 months; today they upgrade every 26+ months.

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Mobile Phone Upgrade Cycle

 

Source: http://www.ev-analyst.com/home/disrupting-automotive-by-adaptation-of-technology-business-model-3-reasons-why-car-ownership-is-dying-12

http://www.ev-analyst.com/home/disrupting-automotive-through-adaptation-of-technology-business-model-how-to-attract-millennials-22

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