Saturday, April 28, 2018

Why are Passenger Cars an Endangered Species? A Demographer You’ve Never Heard Of Just Might, Indirectly, Hold the Key

1967 Cadillac Eldorado
Photo: GM media website.

Unless you’re a hardcore demographics geek like me, you’ve probably never heard of Kenneth W. Gronbach. If you have heard of him, chances are you’re a regular listener to Coast to Coast AM, the popular nationally syndicated talk radio show, on which Gronbach has been interviewed a couple of times by host George Noory.

But regardless of whether you’ve heard of him, Kenneth W. Gronbach, author of Upside: Profiting from the Profound Demographic Shifts Ahead, just might be the most important demographer alive. And his take on millennials, the generation that has overtaken baby boomers as the largest demographic group in the U.S., just might go a long way toward explaining the ongoing decline of the traditional passenger car or sedan—a phenomenon that we at Auto Enthusiasts Newsblaster like to call #DeathOfCar.

If you’re like Kenneth Gronbach, you understand that one of the most dangerous errors of omission that any enterprise can make is to have an incomplete or oversimplified understanding of how demographic factors can profoundly affect economic trends and business outcomes.

In his talk-show appearances, Mr. Gronbach relates that he learned this lesson the hard way. In his days as an advertising-agency owner, he gained a first-hand understanding of the importance of demographics when he lost a large client in the motorcycle industry.

The client made the mistake of failing to anticipate the impact on demand for motorcycles as youngest of the baby boomers, in the 1990s, aged out of the narrow window of youthful years when the purchase of a motorcycle is likely.

As the last of the boomers transitioned to the age at which adult responsibilities like marriage and family begin to drive purchasing decisions, Gronbach’s client was blindsided. Sales dropped dramatically, and the company could not adjust fast enough. Due to the financial impact, the client could no longer afford—and no longer needed—Mr. Gronbach’s advertising services.

This was the beginning of Kenneth W. Gronbach’s rebirth as a demographer. And today,  Gronbach is, to say the least, bullish on the future of the American economy. His application of his incisive demographic thinking leads him to the conclusion that millennials, as they now in turn are aging into a more adult phase of life that involves buying houses and starting families, are on the verge of driving the U.S. into one of the biggest periods economic growth that the nation has ever seen.

It may seem obvious that a certain type of vehicle goes along with entering the “Baby On Board” phase of life—and it’s no coincidence that those tiresome little yellow signs in vehicle windows are starting to make a comeback, just as they emerged in the 1980s as the baby boomers entered their peak childbearing years.

We have indeed seen this movie before, with the “first wave” of America’s love affair with vehicles like minivans and SUVs occurred in the 80s and 90s. But like any cinematic remake, some of the details are different. In the 1990s, for example, we saw the demise of full-size coupes like the Buick Riviera, discontinued by GM after the 1999 model year, as more adults in their peak purchasing years opted for minivans and SUVs, and as pickup trucks grew more popular and passenger friendly.

The biggest difference between then and now is that the crossover phenomenon had not happened yet. Automakers had yet to reach the eureka moment when they realized that you could take a hatchback, lift it a little higher, put bigger wheels on it, and call it a small SUV, creating a vehicle they could sell as marrying the best of the car and SUV worlds.

That’s the story that American automakers seem to trying to pitch to millennials, anyway, and millennials seem to be buying it. Ford, for one, seems well aware of this. In a 2017 news release that in hindsight seems almost prophetic of their announcement this week of the phase-out of the Ford Taurus and Ford Fusion, the company stated that a survey the commissioned found that high-on the current wish-list of millennials was having kids, buying homes in the suburbs, and owning a vehicle that can accommodate family and belongings.

So, particularly in Ford’s case, a demographic shift appears to be a significant factor in the decline of the passenger car. For the same reason, the reality of generational shifts is also why those of us who love the sedan and coupe formats should take heart and look ahead to the likelihood that passenger cars will, in some form, at least, rise again.

Remember: we have seen this movie before, and it isn’t the first time that the Ford Taurus has been discontinued. The Ford Taurus and other once popular passenger cars could easily return from the ashes again, maybe after the kids of the oldest millennials grow up, and their parents start looking toward more lively and interesting automotive options than lookalike CUVs

No comments:

Post a Comment