Auto manufacturers have been bracing for a slump in car sales in the coming years as ownership rates for younger generations are expected to slump. Their reasoning? Millennials and their ilk tend to favor experiences over luxury goods, while also tending to cluster in urban settings where public transportation is easily accessible.
But there might be some hope – at least in the high-end market, which is increasingly catering to a newly-minted cohort of millionaires who made their money in tech and finance. To wit, Rolls Royce has revealed that the average age of its customer base is declining, having fallen to 45, compared with 56 seven years ago.
That’s lower than the average range for new-car buyers overall, which hovers around 52, and younger than the average age of luxury car buyers, too, which is 50, according to data provided to Bloomberg by Kelley Blue Book.
The Wraith coupe
The average age of Rolls Royce owners is below Buick, Cadillac, Mercedes-Benz and BMW.
“Buick, for instance, has an average new-buyer age of 59. At Cadillac it’s 52, at Mercedes-Benz it’s 51, and at BMW it’s 50, according to KBB. Land Rover’s average customer is 45, the youngest of any included in the data. (Rolls-Royce was not among the brands reviewed in that report—its numbers are internal.) Bentley, a closer competitor to Rolls-Royce, reported an average buyer age of 56.2 years in 2014, though that number is likely younger now.”
Indeed, it appears the 111-year-old brand, which is known for its stuffy old-money aesthetic, is attracting a new generation of customers among the next generation of tech and finance elites. The company’s CEO Torsten Müller-Ötvös, has touted the decline as a sign that the luxury carmaker is succeeding in its push to attract younger drivers with newer, more modern-looking cars.
The Phantom
“We are now catering all to the different kinds of set groups when it comes to customers,” Müller-Ötvös said. “These are customers who for the first time said, ‘Oh, guess what. I like this Wraith, and I put it in addition to my Ferraris into my garage, because Ferraris can be stressful from time to time.’ ”
As is the case with all luxury items, remaining "cool" is essential to a brands survival - hence why Royce felt the need to shout news that it's selling to younger buyers from the mountaintops.
“Why does attracting a young(ish) buyer pool matter? For one thing, it prevents against the hypothetical eventuality that your customers eventually die off. Older buyers tend to be loyal buyers, but as they age, their numbers naturally dwindle.
More immediately, it has to do with brand image. If pensioners are the ones driving your cars, the rest of the world inevitably associates the brand with their age set. That doesn’t exactly foster future buying excitement.”
In another interesting shift, the new buyers that Rolls Royce is courting have a somewhat different profile.
CEO Torsten Müller-Ötvös
The reason for the relative youth of Rolls buyers has to do with how they’re amassing their wealth, Müller-Ötvös said. Rather than in previous decades when acquiring it from Daddy was a viable, and respectable, option, he’s noticing the people turning up at his dealerships are self-made.
“It's not any longer inherited money,” he said. “The majority is all self-generated money in very young people who are already making fortunes, be it real estate, be it engineering, be it IT, be it Western entertainment, whatever.”
As Bloomberg explains, the declining average age of Rolls Royce buyers seems to cut against the conventional wisdom – but not the masses of data that show young people still buy cars at rates comparable to older cohorts of the population.
Experts have warily anticipated in recent years an expected slump in car sales as millennials begin to overtake baby boomers in the marketplace as the world’s biggest spenders. The theory was that they cared less about owning things—houses, property, cars—than in just being able to access them at any given time. The success of shared-access businesses Uber, Airbnb, and Rent the Runway, plus the rise in the development of self-driving cars and other forms of urban transportation in any number of various pods, seemed to support that idea.
But further studies have indicated the contrary. According to J.D. Power & Associates, millennials’ share of new vehicle purchases in the U.S. hit 27 percent in 2014, up from 18 percent in 2010. They’ll comprise 40 percent of the U.S. car market by 2020. (The report classified millennials as those born between 1977 and 1994.)
The age of luxury-car owners is declining in China, too, despite a crackdown on corruption initiated by Chinese President Xi Jinping that included measures to curb the acceptance of luxury gifts – which sometimes included fancy cars – by public officials.
“In China, the average age of new-car buyers hovers around 34. Thirty-eight percent of all new luxury car buyers there are under 40. Last year, Cadillac boasted widely about its 34-year-old average buyers in China.”
Despite the crackdown, the unprecedented debt-enhanced creation of wealth in the world's second-largest economy appears to ensure that Rolls Royce's future is in the east.