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From Apple to Zipcar, Auto Brands Hunt Millennials

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Auto makers are deeply concerned that Millennials don't care about vehicles nearly as much as they do about the next iPhone. So the companies have become decidedly more intent on roping in these car-reluctant twenty-somethings.

That's one big reason why, for instance, Ford has decided to set up shop, literally, in Silicon Valley, and why General Motors has turned for marketing advice to MTV.

Generation Y has looked like trouble for a while to America's automakers because they never really swooned about cars the way their boomer parents did -- and often still do. Thirty years from now, don't count on Chevrolet running some new take on its recent TV ad featuring a 50-something father tearing up as his adult kids reunite him with the actual first Chevy he owned as a young man.

But from Apple to Zipcar, and from East Coast to West, automakers still are trying to pique the passions of a generation before they get away. "We are so knee-deep into this," Joel Ewanick, GM's global chief marketing officer, told me -- and that was nearly a year ago. "It's a huge initiative for us."

Other auto makers also underscore the significance of the challenge. As a generation of 75 million members even larger than the highly influential baby boomer cohort, Millennials are "hugely significant in terms of raw numbers alone," said Sage Marie, a senior manager at American Honda. "Capturing their business and ensuring their loyalty is crucial for the future."

At least three factors make young auto buyers hard to get.

First is that the importance of digital connectivity to Millennials appears to be interfering with their interest in automobiles rather than contributing to it. So, while Ford managed to capitalize on this generational mania with its trailblazing Sync infotainment platform, the quick adoption of Sync by twenty-somethings actually may be a harbinger of trouble as much as evidence that Ford has this thing figured out.

In fact, 46 percent of drivers aged 18 to 24 said they would choose internet access over owning a car, according to the Gartner research firm. A recent study by Zipcar, the car-sharing service, found that 68 percent of Millennials, up 14 points from 2010, sometimes chose to amuse themselves with social media rather than go out to see friends and family.

And new research by the Transportation Research Institute of the University of Michigan found an inversely proportional relationship among Generation Y members between internet usage and rates of driver licensure, in the United States and several other western economies. "Countries with higher proportions of internet users were associated with lower licensure rates among young persons, which is consistent with the hypothesis that access to virtual contact through electronic means reduces the need for actual contact among young people," wrote study authors Michael Sivak and Brandon Schoettle in the journal Traffic Inquiry Prevention.

A second reason Millennials remain so elusive to automakers is that they simply appear less interested than their elders in the notion of owning a car -- or even driving one. Fifty-five percent of Millennials surveyed by Zipcar have "actively made an effort to drive less," up 10 percentage points from 45 percent in 2010. Respondents mostly cited reasons such as environmental concerns, high cost of vehicle ownership -- and more use of social media.

Zipcar failed to mention another obvious obstacle: Millennials have been hard-hit by unemployment since the beginning of the Great Recession and so have less need or occasion to use a vehicle to get to work.

And Zipcar found Millennials more open than previous generations to participating in "collaborative consumption programs" -- such as car-sharing -- whose net effect, obviously, is the sale of fewer automobiles. About 53 percent of them indicated they likely would participate in a car-sharing service. "Millennials still value the mobility factor and convenience of driving but increasingly seek and use alternatives to personally owning a car," Zipcar said.

Yet a third reason is that car brands increasingly flunk the relevance test with Generation Y. MTV Scratch, a consulting unit of the youth-oriented TV channel, said that not one car brand ranked in the top 10 when Millennials were surveyed to see which of 31 brands of all types that they preferred, finishing far behind obvious suspects such as Google.

It's not that adults from teenagers through their early thirties now flat out don't care about automobiles. But clearly they're less emotionally engaged, and differently so, than boomers and even many Generation X members.

This trend is advanced in Japan. "The United States is not anywhere near that, and it will be a long time before we are," a former top American product-planning executive at a Japanese brand told me. "But there are signs that [American Millennials] are chipping away at the emotional side of cars."

And what does draw them in is different -- "green" chops, instead of tire-squealing stoplight credibility, for instance. "There's less emphasis on straight-line speed and horsepower, and it's more cool to get a car that is more fuel-efficient," Eric Wong, a product-planning manager for Mazda in the U.S., told me.

Styling remains important to many Millennials, including a huge customization trend that bespeaks their interest in parts of the automobile other than the USB port. "Customization up and down the line is key to winning over this generation, and it's not just a matter of connectivity," said Richard Wallace, director of transportation systems analysis at the Center for Automotive Research, in Ann Arbor, Mich.

In any event, according to the Federal Highway Administration, only 46 percent of potential drivers 19 years old and younger had driver's licenses in 2008, down from 64 percent just a decade earlier. And researchers Sivak and Schoettle pointed out that, in 1983, one third of all licensed U.S. drivers were under age 30, while today, only about 22 percent of drivers are twenty-somethings or teenagers.

Even auto dealerships are struggling with Millennials. The OEM-brand dealership seems to be becoming a “senior center” as younger consumer segments are significantly gravitating toward aftermarket chains for their service needs, according to a new report by DMEautomotive, a Daytona Beach, Fla.-based consulting firm to auto dealerships and others in the industry.

The industry doesn't have the choice of resignation to the indifference of Generation Y. So GM, for instance, last year hired a 31-year-old P&G alumnus to head up Millennial-marketing efforts. Then, Ewanick began talking obliquely about making Chevrolet into a sort of lifestyle and technology brand that young consumers might identify with the same way they are drawn to Apple.

And now comes word that GM has hired MTV Scratch to figure out youth tastes. Car companies are realizing that if they do not adjust to changing youth tastes, they "risk becoming the dad at the middle school dance," Anne Hubert, Scratch senior vice president who works closely with GM, told the New York Times.

For its part, Ford struck a partnership with Zipcar last year to supply Focus and Escape models to test a car-sharing program at 250 university campuses. Another gambit by Ford was last week's announcement that the company selected Palo Alto to establish its first Silicon Valley Lab, in the heart of the world's leading digital-entrepreneurship nexus. It's the first such research operation for Ford on the West Coast.

Earlier, Ford cited other reasons for establishing a beachhead in Silicon Valley, including accelerating research into sensor technology. But clearly, cracking the code for harnessing digital technology to appeal to Millennials is one of the biggest aims.

"Our new Silicon Valley Lab will help us innovate even faster as emerging ideas and technologies are [a] key part of the culture," Paul Mascarenas, Ford's chief technical officer, said in a press statement.

And by culture, he means "digital youth culture." Because that's where the future is, today that's where GM, Ford and their competitors are trying to do better.