Teens’ Rites of Passage: Technology Trumps Transportation

Technology, not cars with teens.
Technology, not cars, are where it’s at with teens today.

Thirty years ago, the rite of passage going from being a kid to adulthood had to include having your own automobile.

Not so today.

In fact, the percentage of young adults who even have their driver’s license has declined considerably:  In the early 1980s, nearly half of 16-year-olds in America had a driver’s license. By 2010, that percentage had dropped to just ~28%.

What happened between then and now? A number of things, but the biggest may be the rise of consumer electronics and social media.

Recall what an automobile could provide a young adult in the 1980s: access to all of the kid-popular activities of the day: shopping, music, movies, getting together with friends, and so forth.

Today, teens can access pretty much all of that right at their fingertips via the Internet or a smartphone.

You want clothes? Order them online.

Music? Download it to your smartphone.

Communicate with friends? Just Skype or text away.

Meanwhile, between more sophisticated, costly auto maintenance and the high price of gasoline, owning a car has only become more expensive.

Auto insurance premiums for teens? Outta sight.

Plus, it’s just more of a hassle to get a license today. Driver education classes are disappearing from many a public school classroom, the casualty of budget cuts. Stricter state laws make it much more difficult and time-consuming to rack up the necessary behind-the-wheel training hours prior to taking driving tests.

The result is fewer kids getting licensed during their teen years.

In 1983, nearly 70% of 17-year-old Americans had drivers licenses … a figure that dropped to just ~46% by 2010.

Even for 18-year-olds, the percentage holding drivers licenses declined from ~80% in 1983 to only about 60% in 2010.

A recent survey conducted by Zipcar found that millennials (people age 18 to 34) would rather shop online than in stores. No car needed for that.

And when presented the choice between giving up their phone or their tablet computer or their car … two thirds of the Zipcar survey respondents would forego the car.

This is a veritable sea change in attitudes about wheels.

In fact, one could conclude that the very things that cars once represented – the “vehicle” that enabled you to “do what you want, see who you want and be what you want” – is what actually describes the digital and social media world today.

Meanwhile … the car is now just a way to get to your part-time job. Ugh.

AAA Does the Math on the Cost of Automobile Ownership

Cost of Automobile OwnershipIt’s gotten a lot more costly to own and operate an automobile in recent years. That’s the clear conclusion one can draw from an evaluation done by the American Automobile Association.

The latest AAA analysis, based on a survey of driving costs it conducts annually, has determined that the “average car” (a midsize sedan) costs nearly $9,000 each year to keep fueled, licensed, insured and maintained.

That’s $750 per month – hardly chump change.

Not surprisingly, the cost of fuel is the biggest culprit in the upward trajectory of costs. Fuel prices have risen most dramatically in the past year.

But that’s not the only source of added expense; AAA found other items that have also contributed to higher costs, rising higer than the rate of inflation though not as sharply as gasoline:

  • Fuel cost: Up ~15% over the past year
  • Replacement tires: ~4% increase
  • Automotive insurance: ~4% increase

The typical American motorist is now spending ~$1,000 per year on automotive insurance, AAA finds.

But there are wide swings in the cost per motorist based on driving records, the type and age of the vehicle, the geographic location and so forth, so some lucky souls are paying only half the average.

Another finding: Today’s more sophisticated motor vehicles make them more complicated to service – thus increasing the time it takes to repair them. Time is money – and never more so as when a car is in the service bay!

The only category where cost reductions have been observed lately is in automobile depreciation, which is lower by about 5% compared to last year.

The reason? Reduced new car sales have resulted in a relative shortage of quality used cars available for sale, thereby driving up their value.

As an interesting aside, AAA has been conducting these surveys each year since 1950. Sixty years ago, motorists typically put ~10,000 miles on their cars, and fuel cost just 27 cents per gallon.

Today, the average motorist clocks ~15,000 miles on his or her vehicle in a year’s time. And, as we know all too well, fuel costs have been bounding around between $3.50 and $4.00 per gallon.

Oh, for the good ol’ days … even just five years ago!

Mini Cooper and Tata Nano: Two Sizzling Cars that are Just Smokin’!

Mini Cooper car on fire.
The Mini Cooper: Not exactly "sizzling" in the way their owners would like.
Tata Nano vehicle on fire.
Tata Nano: One smokin' vehicle.
The news that the National Highway Traffic Safety Administration is investigating complaints of engine fires in Mini Cooper “S” auto models from 2007 and 2008 reminds us that the “explosive” popularity of small cars is sometimes accompanied by “smokin’” performance of a completely different nature.

The Mini Cooper’s engine fires have resulted in blazes that can destroy the entire car … and some of those fires happened after the vehicles had been shut off. Owners of the Mini Cooper, Cooper Clubman and Cooper Convertible, you’ve been fairly warned!

Hopefully, the findings from the NHTSA investigation won’t be as crippling for the Mini Cooper as similar investigations of the Tata Nano car in India. That vehicle burst on the scene in 2009 to breathless praise from all quarters, ranging from top industrial designers to leading consumer advocates.

With a base price of just $2,200 – lower than any other car in the world – along with noteworthy styling that had the design world abuzz, it was an irresistible story of the confluence of value engineering and design chic.

Until the car’s engines starting catching on fire.

Tata Motors has been frantically working on the problem in recent months, adding new safety features to the Nano (now dubbed the “Tata No-No” by more than a few industry observers). The manufacturer has also extended the car’s warranty to four years and is offering big discounts and cheap financing to maintain sales levels.

Nevertheless, the company has seen monthly unit purchases slide by more than 80%. It’s certainly a far cry from the heady days of 2008 when the Tata Nano won the prestigious Innovation Award in the Transportation category and was the toast of the design world.

Will the Mini Cooper follow the Tata Nano into automotive ignominy? Likely not. But it’s a huge black eye for a car brand that’s been nearly immune from criticism – at least until now.

One thing’s for sure: Before this week, no one would have expected the Mini Cooper and Tata Nano to be spoken about in the same breath. Now they’re the Bobbsey Twins. And that has to be really bad news for the Mini Cooper.

The Limits of Delivering “Cheaper Value”

Nano vehicle

Tata Nano car on fire
Tata Nano ... Tata "No-No"?
About a year ago, the international press was abuzz about the latest new “value” entry in the automobile business. Amid great fanfare, Tata Motors, part of India’s largest corporate conglomerate, was introducing the “Nano,” a car designed to appeal to India’s mass market.

The Nano, which can seat five people and has a surprisingly roomy interior for its size, carries a base price of only ~$2,200 — lower than any other car in the world — which proved irresistible to families of modest means whose finances had required that they make do with motorcycles or scooters before.

Some 9,000 Nano vehicles were delivered in July, but since then, sales have slowed dramatically – to just around 500 shipments to dealers in November.

How did Nano’s star fall so far, so fast – especially for a vehicle which Tata Motors thought was impressive enough that it planned to introduce it in other developing markets … then Europe … and finally to the United States?

Production delays have something to do with it. But the real problem is the performance of the car. Most alarming are reports that the vehicle can catch on fire, with one widely broadcast incident where a Nano caught on fire and was engulfed by flames on the way home from the auto showroom!

In response, Tata, while denying anything is wrong with the design of the Nano and studiously avoiding any language of “recall,” is offering to retrofit the automobile with extra safety features. It’s also extending the warranty on the car from 18 months to a solid four years.

Will these moves change the impression that the car is more of a “No-No” rather than a “Nano” and move its sales trajectory back into positive territory? Perhaps. But it’s interesting to note that sales of a rival “value” car made by Suzuki – the “Alto” – have now overtaken those of the Nano. The Alto carries a higher base price of $6,200, and yet it posted unit sales of ~30,000 in November, making it India’s best-selling car that month.

[The success of the Suzuki Alto in India is nice news for a company whose cars in the U.S. have been on a downward plunge all this year – with sales off ~42% in 2010 compared to 2009.]

The experience of the Nano and the Alto in India brings up an interesting question: Is it possible to make small, cheap version of products that are significant purchase items and win the confidence of a broad customer base?

To a degree, yes. But there are limits to “how low you can go” in value-engineering a product for performance and safety, below which customers just turn and walk away. (Or, in this case, drive away.)

Moreover, just like the experience of the Yugo or the Trabant, there’s a risk of forming a poor market image that’s impossible to shake off.

And in this particular case, the brand names don’t help at all. It’s just too easy for disgusted consumers to say “Ta-Ta” to Tata Motors and “No-No” to the Nano.

Let’s Revisit the Yugo!

Yugo advertisementThose of us “of a certain age” remember well when the Yugo car was introduced to America with great fanfare. In 1985, the prospect of purchasing a small vehicle with an even smaller price tag (~$3,990) was irresistible to many – even with the high gasoline prices and gas lines of the 1970s looking more distant in the rearview mirror. For those on a budget, who could resist the allure of buying a new car for $99 down and a $99 monthly payment?

Here’s a startling statistic that bears this out: When the Yugo was introduced in the summer of 1985, more than 1,000 of them were sold in one day. In fact, the Yugo was to be the fastest-selling first-year European import ever sold into the U.S. – a record that stands yet today.

But in just a few short years, the Yugo would go from being a star to being a dud … from being the “it” car to being the butt of jokes.

How could this happen? The answers are found in a just-released book “The Yugo: The Rise and Fall of the Worst Car in History,” written by Jason Vuic (ISBN-13: 978-0809098910). This pithy, irreverent volume takes readers on a merry romp through its 250+ pages … and things never have time to become dull.

One of the earliest signs that the Yugo might not be all it was cracked up to be came when its American investors decided to drive a Yugo car across the country. What better way to test the product? In retrospect, they should have heeded the clear warning signs: the new car broke down not once … not twice … but three times during its ~3,000 mile journey.

Undeterred, they plowed ahead, forming a national dealer network and trumpeting the Yugo as a fresh, affordable European car that came with a small price tag and a big attitude.

But the reviews were scathing from the get-go. The car broke down during a road test by Motor Trend, leading the magazine to conclude that the vehicle was “hard to recommend at any price.” Some customers reported that their new Yugos came off the dealer lot with rust spots already showing in the trunk. That plus noisy brakes … rough-riding clutch … and a few other deficiencies not normally experienced until any other car is years old.

Predictably, it didn’t take long for the magic to wear off. By the time of Saturday Night Live’s famous parody of the Yugo – its fake TV ad for the Adobe clay car (at $179 apiece) – Yugo dealers across America were already closing their doors.

Actually, what’s most surprising to read is that the Yugo actually continued to be manufactured in Europe as late as 2008.

In retrospect, I suppose the Yugo wasn’t a complete waste of time. It helped us realize – once again – that despite the enduring appeal of a low-cost alternative, there’s no substitute for producing a quality product.

It’s also given us 25 years of great jokes.