The Second US Automotive Reckoning?
It's Just Around the Corner
In the early 1970’s, American cars were sold primarily on style and performance. Fins and chrome defined style, with cosmetic changes every 2 years to drive perceived obsolescence. Bigger and faster meant better. Fuel economy averaged around 12 MPG. The average age of cars on the road was 5.6 years, and it was the norm for most cars to head to the scrapyard before their 10th birthday.
In 1973, the first oil crisis hit America, just as Baby Boomers were coming of age. Detroit remained complacent while higher quality, more economical Japanese brands disrupted the status quo, winning over a new generation of car buyers. As a result, share of American nameplates began a long decline from ~80% in 1970 to less than 40% today, with several brands disappearing altogether.
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| 1973 Cadillac vs 1973 Toyota Corolla |
Forty years later, it seems that the US automotive market is on the precipice of another reckoning, where all brands, import and domestic are ignoring significant internal and external marketplace threats that will likely disrupt the status quo once again.
The Aging of New Car Buyers
While automotive sales appear strong, they are driven by an increasingly older demographic, that leaves younger buyers behind. The median age of a new car buyer is 54 vs 47 for total US adults. This gap has been widening over time, due to the following factors.
Affordability Gap
New cars have become increasingly more expensive to buy and own. The average transaction price for a new car has risen from $36,000 in 2016 to almost $50,000 today. This 47% increase has significantly outpaced the average US household income, which has risen by just 16% over the same period. But that’s just the start, the average premium for full coverage car insurance has risen between 65 and 71%, and the average price of gas has almost doubled. Maintenance adds another $600-$1200 per year. Average total annual operating costs are over $14,000 per year making car ownership out of reach for many, particularly for a device that they typically use a little over 1 hour per day.
The Availability of Other Forms of Personal Transportation
Ride sharing’s popularity has been steadily growing. Since its launch, Uber’s active US subscriber base has grown to 53 million, with the heaviest concentration in 18–34-year-olds. For frequent ride sharing users, car ownership is 18% lower than the total population.
The Abandonment of EV Investment
Prior to the Fall of 2025, EV sales in the US were growing rapidly, accounting for over 10% of total automotive sales. When the Federal EV tax credit expired, EV sales naturally fell. As a result, many manufacturers who just a few months earlier had been touting EV’s as the future, began pulling back on investment in new, more efficient EV technology. In the last year, ~10 EV nameplates from existing brands have been discontinued, with another 15-20 launches cancelled or delayed.
Despite this pullback, younger buyers prefer EV’s. While nearly half of gas and hybrid sales are to buyers 55 and older, nearly 2/3 of EV buyers are under 55.
Meanwhile, EV sales have been growing in most other regions outside of the US, with EV share of global new cars sales projected to reach 30% in 2026, fueled by lower priced Chinese EV’s.
As China gains share in the rest of the world, it is only a matter of time before Chinese brands enter the US market, introducing lower priced, long range EV’s to financially strapped buyers.
The Reckoning 2?
While it seems that we are poised for a second reckoning, perhaps it’s not too late for brands operating in the US to survive and perhaps thrive through this one if they question the status quo and begin to meet the next generation’s needs. But how?
1. Take a lesson from the past to better understand how their customers truly live.
· Before Toyota launched Lexus in the 1980’s, rather than rely on surveys, they sent a team of designers and engineers to the US to immerse themselves in their target, ‘Yuppies’ lifestyle. They lived in the same neighborhoods, went to the same restaurants, experienced the same entertainment, and observed how they used their vehicles. This allowed them to prioritize certain vehicle features and design aesthetics, as well as creating a unique dealership experience.
· Today, the automotive business is driven by digital metrics and legacy syndicated data bases that provide little insight beyond car imagery and purchase behaviors. Perhaps it’s time for automotive executives to better understand how a younger audience lives and prioritizes its experiences.
2. Add value beyond the sheet metal
· Look for inspiration outside of the car business for ways to make new car purchases worth the price. Are there partnerships with hotel chains, fast food restaurants or other businesses that provide owners with complementary experiences that can create incremental perceived value to mitigate the high cost of ownership?
· Consider ‘membership’ programs that reward first time buyers with perks like insurance and fuel discounts that increase with repurchase.
3. Walk the ‘mobility’ talk
· Just about every OEM website uses the word ‘mobility’ somewhere, often as a business definer, yet few offer anything beyond a purchase or a lease of a vehicle
· Is there an offering like subscriptions or short-term leases that allow customers to use ‘occasion-appropriate’ vehicles when needed—SUV for the weekend, and economy car for the weekly commute?
· Is it possible to compete with Uber by hiring drivers to transport passengers on demand in company owned and operated fleets that can create a long-term affinity for your brand?
4. Revitalize EV investments and programs to create affordable alternatives to Chinese brands
· As new technology is developed, integrate these vehicles into the above programs to get a head start on the inevitable. While they may not show instant returns, in the long run, this might be the best way to fend off the impending Chinese invasion, and avoid the dire consequences of the Reckoning 2.
