Next on the Horizon: Gen Z

The Biggest, Most Diverse Generation Ever and with a Whopping $3.2 Trillion in Purchasing Power!

Cautious spenders. Practical consumers. Substantial spending power. Meet Gen Z. Just as automotive marketers are getting their arms around meeting Millennials’ needs, along comes Gen Z. In new research from Autotrader and Kelley Blue Book, the topline is this largest generation yet has several characteristics that make it distinctly different from its predecessors. Here’s what you need to know to win the hearts and minds of this young – and ultimately – very wealthy, yet cautious-spending, cohort.

Gen Z: 25% of the Population¹

Born between 1998 and 2016, the 80-million strong Gen Z generation (also nicknamed “iGen”) isn’t anything to be trifled with. Today’s 16-year-olds – part of Generation Z – live in a world that’s very different from 10 years ago. Unlike Millennials, Gen Z has never known the peace and prosperity of the 1990s, only the Great Recession and the war on terror. As a result, the conditions of their time have deeply affected their spending habits.

Today, they influence $200 billion in annual spending power annually on parental or household purchases.² By 2020, they’ll account for 40% of all consumers and their purchasing power will equal the GDP of some small countries. However, they’re by nature more cautious spenders with 57% preferring saving over spending.³ Unlike Millennials, Gen Z is less likely to be influenced by prestige and more likely to be influenced by safety and practicality that’s integrated with technology.

In fact, Gen Z will never be, go or do without technology. It’s in their DNA. They are the first real digital natives who were raised using five screens such as the smartphone, desktop, laptop, tablet and TV to communicate and digest information. A quarter of Gen Zs are connected within 5 minutes of waking up; nearly all are connected within an hour or less of waking up⁴ and they’re all using social media.

Most importantly, though, is that Gen Z is the most diverse generation to date.¹ Social media connects them to the far corners of the world where they routinely communicate with hugely diverse populations and think nothing of it.

Gen Z Wants to Own and Drive Cars

Like Millennials, Gen Z is less likely to view car ownership as a necessity, 92% still plan to own a car and nearly all of them plan to get a driver’s license. For Gen Z, a car represents freedom and convenience, but it doesn’t represent who they are. It also represents a safer, more reliable alternative to car/ride-sharing. Car ownership is so important to Gen Z, they say they’d be willing to give up social media (their lifeline), new clothes, events and eating out for a year just to have one. Surprisingly, a third even say they’d give up their cell phone!

Given their cautious spending habits, it should come as not surprise that price and gas mileage are key considerations for Gen Z, with safety features trumping brand, style and even infotainment technology. This is likely due to having been exposed to media messages and real-life experiences about the dangers of distracted driving.

The study found that while Gen Zs are more likely to want a car that’s environmentally friendly, 43% consider “green cars” for their cost-savings versus just 30% who consider them because they’ll help prevent global warming.

Gen Z is less concerned with “vehicle popularity” and prefer Chevrolet, Ford, Honda, Jeep and Toyota (brands they describe as practical, traditional and trusted). But there are no clear leaders for Gen Zs with attributes like modern, innovative, trendsetting, youthful and genuine.

What you need to know:

• Focus on the practicality, safety and associated technology that Gen Zs want.
• Gen Z is more concerned with saving money than saving the planet.
• Look for opportunities to connect your brand(s) through the attributes and features Gen Zs want.

Safety, Not Technology, Drives Gen Z’s Attraction to Self-Driving Cars

Gen Z drivers are worried about distracted drivers. And while they believe it’s because of technology, they also believe that technology is the solution. Over half (56%) say they would be as or more comfortable in a fully self-driving vehicle, and nearly two-thirds think roads would be safer if most vehicles were fully self-driving, citing fewer distracted drivers and fewer accidents. And while they’re willing to consider basic autonomous features that assist in specific tasks, Gen Z doesn’t trust the current technology, which is compounded by their concern about affordability.

What you need to know:

• Promote safety attributes and semi-autonomous features in your vehicles that prevent distracted driving and result in fewer accidents.
• Ensure your sales and service teams are well-trained in the technology and can demonstrate it easily to Gen Z consumers.

Face-to-Face Interactions Are Important to Gen Z

Despite being digital natives, Gen Z values face-to-face interactions even more than other generations. This is the first generation who feels smartphones are equally as important as a PC/laptop in car shopping. While they’re equally comfortable shopping offline as online, 67% of the respondents in the study say they would rather car-shop in-store. Few want to buy their car online.

What does the ideal experience look like? Gen Z values a positive experience first and foremost, while convenience and price rank highest among all other generations. The test drive is critical to their experience, second only to parents in influencing their vehicle purchase decision.

What you need to know:

• Smartphones are nearly as important as a PC/laptop in the car-shopping experience so it’s important to deliver a good experience on all devices.
• Focus on creating a seamless experience that integrates online and offline with investments in mobile technology and social media.
• Excitement during the process tends to fade. Delivering an efficient and convenient experience helps keep satisfaction high.
• Test drives are very important. Think about what you can do to deliver more innovative ways to make a memorable experience, such as creating an “experience center,” and the lines between marketing, customer service and sales will blur.
• Gen Z is the most diverse generation ever. It’s a good idea for them to engage with a diverse team at your dealership.

TV and Online Advertising Are the Most Effective Way to Reach and Influence Gen Z

This generation is highly visual — even more so than Millennials and older generations. When learning about cars, family and friends are almost as important as the Internet. While manufacturer, third-party and dealer websites are the top-used online sources, social media’s role in car shopping will continue to grow — though it’s not like the social media we know today — Gen Z uses it for research and to get others’ opinions. For Gen Z, YouTube is more important than Facebook, with Instagram and Snapchat following close behind.

What you need to know:

• Ensure you’ve got a strategy to have a presence on Gen Z’s favorite online hotspots — YouTube, Facebook, Instagram and Snapchat.
• Strong visuals, interactivity and minimal words are effective at reaching Gen Z.
• Wherever possible, engage them with interactive tools.
• Ensure your advertising messages and design are consistent with Tier 1 and Tier 2 to make the biggest impact.

Largely the offspring of Gen X, with the oldest members barely out of high school, Gen Z is primed to eclipse Millennials as the dominant youth influencers of tomorrow. With billions in spending power, car dealers who work to provide the messaging and experience this generation expects put themselves in a positive to succeed over the short- and the long-haul.