Automakers Not Just Selling, But Sharing

by Susan J. Aluise | April 10, 2013 8:58 am

Automakers Not Just Selling, But Sharing

Millennials must not like car salesmen.

Manufacturers like Ford (NYSE:F[1]), General Motors (NYSE:GM[2]), Fiat’s (PINK:FIATY[3]) Chrysler and Toyota (NYSE:TM[4]) are struggling to sell vehicles to younger consumers, with members of the 18-34 age group significantly less likely to purchase a vehicle than prior generations were.

The Great Recession hit millennials harder than most groups, so they’re naturally more hesitant to drop a five-figure check for a depreciating asset. They also seem to view cars as a means to an end, not an extension of their identity — which throws a wrench in the way cars have been marketed for decades.

Automakers face an even greater challenge now thanks to car-sharing programs that allow consumers to rent vehicles for very short time frames (hours instead of days). This trend first hit Europe and is now gaining steam in the U.S. through companies like Zipcar.

As of last October, car sharing was available in 27 countries and on five continents, according to the Transportation Sustainability Research Center’s “Innovative Mobility Carsharing Outlook.”[5] North America is the largest region with an estimated total of 908,584 members and a fleet of 15,795.

So far, Zipcar has been the most successful player on the field — and soon will gain even more market power. In January, it announced plans to merge with Avis Budget Group (NASDAQ:CAR[6]) in a deal valued at $500 million. Now, rental rivals Hertz (NYSE:HTZ[7]) and privately held Enterprise are beginning to encroach on the self-service company’s hourly rental market.

Given these trends, what can automakers do to defend their turf?

As the old line goes: “If you can’t beat ’em, join ’em.” With that in mind, here’s a breakdown of some of the initiatives currently underway:

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.

Endnotes:
  1. F: http://studio-5.financialcontent.com/investplace/quote?Symbol=F
  2. GM: http://studio-5.financialcontent.com/investplace/quote?Symbol=GM
  3. FIATY: http://studio-5.financialcontent.com/investplace/quote?Symbol=FIATY
  4. TM: http://studio-5.financialcontent.com/investplace/quote?Symbol=TM
  5. “Innovative Mobility Carsharing Outlook.”: http://76.12.4.249/artman2/uploads/1/Carsharing_Innovative_Mobility_Industry_Outlook_1.pdf
  6. CAR: http://studio-5.financialcontent.com/investplace/quote?Symbol=CAR
  7. HTZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HTZ
  8. 6,000-person survey: http://corporate.ford.com/news-center/press-releases-detail/pr-ford-launches-pioneering-ford2go-37770
  9. DDAIF: http://studio-5.financialcontent.com/investplace/quote?Symbol=DDAIF
  10. car-sharing program: http://www.plugincars.com/france-ev-innovation-hits-la-rue-126853.html

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