The younger car buyers are, the less likely they are to make their next car a hybrid or EV

One of the most interesting stories already emerging from our new automotive study is the contradiction between a  high degree of consumer favorability towards hybrid vehicles and EVs and softness in near-term purchase intent for hybrids and EVs for a few key demographics. For instance, roughly one-third of North American car buyers who signal a high likelihood of buying a hybrid or an EV at some indeterminate point in the future intend to stick to a gasoline vehicle for their next car purchase. Specifically, our data indicate that the younger car buyers are, the less likely they are to choose a hybrid or EV as their next vehicle purchase.

This seems paradoxical for three reasons:

1. Likely car buyers in the youngest age group (18-24) show the highest two-year improvement in positive sentiment towards hybrids and EVs.

• 60% of likely car buyers 18-24 report being more positive about hybrids and EVs than they were two years ago.

2. Likely car buyers in the 18-24 age group express the highest probability of future hybrid and EV ownership.

• 68.6% of likely car buyers 18-24 who are not planning to make their next car a hybrid or an EV, signaling that they are nonetheless open to owning a hybrid or EV at some point in the future.

3. Younger consumers tend to be generally more comfortable with technology adoption than their older counterparts, making new types of automotive technologies easier to adapt to for younger consumers.

And yet, 61.2% of likely car buyers aged 18-24 plan to stick to gasoline-powered cars for their next car purchase. That number is significantly higher than the market average of 48.9% and stands out from every other age group considering a vehicle purchase in the next 36 months.

Looking at this data through another lens, nearly 2 in 3 buyers aged 65 and older plan to make their next vehicle a hybrid or an EV, but only 1 in 3 buyers 18-24 plan to do the same. Our data signaling a large proportion of older consumers plan to purchase hybrids and EVs isn’t surprising, but we were curious as to why so many young car buyers didn’t seem ready to invest in the hybrid and EV market just yet, despite having signaled very strong favorability towards hybrid and EV ownership.

 

Exploring The Gap Between High EV Favorability vs Low Near-Term Purchase Intent Among Younger Car Buyers

As it turns out, the number one explanation for the gap between enthusiasm for hybrids and EVs and short-term purchase intent is price: 46.5% of consumers not currently planning to make their next car a hybrid or an EV pointed to price as their primary reason. An additional 37.2% of likely car buyers planning to stick to gasoline for now signal that price is a somewhat relevant reason. In contrast, only 16.4% of car buyers sticking to gasoline, for now, consider price to be not at all relevant to their purchasing decision.  

We wondered if we might discover a difference between men and women in this regard, but there doesn’t appear to be: 45.3% of men and 47.6% of women highlight price as the primary hurdle keeping them from moving away from gasoline, making the price hurdle fairly evenly between men and women. 

Age, however, turns out to be a factor when it comes to price accessibility: While 46.5% of consumers across all age groups not currently planning to make their next car a hybrid or an EV point to price as their primary reason for their decision, a whopping 58.6% of likely car buyers in the 18-24 age group list price as their primary short-term purchasing hurdle keeping them tethered to the gasoline pump for a little while longer.

Compare that number to other age groups in our study: Only 43.2% of buyers aged 25-34 and 39.7% of buyers aged 35-44 list price as their primary reason for making their next car gasoline-powered instead of a hybrid or EV. Car buyers in the 45-54, 55-64, and 65+ age groups highlighted price as their primary hurdle to short-term hybrid and EV adoption at rates of 51%, 45.7%, and 50% respectively. What we see from this data is that even accounting for a slight uptick in price friction among middle-aged and older consumers, the 18-24 age group seems especially affected by the high price of hybrids and EVs relative to other options.

Additionally, 50% of prospective car buyers in the 18-24 age group expect their next car to be pre-owned. This number stands out when compared to how the other age groups approach the new versus used (or pre-owned) car-buying question, with only 39.9% of buyers 25-34, 37.5% of buyers 35-44, 40.3% of buyers 45-54, 38.2% of buyers 55-65, and only 24.6% of buyers over the age of 65, planning to go with a used car for their next purchase. 

This difference is significant when looking at how the economics of car buying impact different age groups. Half of likely car buyers aged 18-24 planning to buy used or pre-owned for the time being suggests that the economic hurdle keeping younger car buyers locked into the gasoline-powered vehicle ecosystem isn’t solely about the high price of hybrids and EVs. That bit of insight also suggests, more broadly, that likely car buyers aged 18-24 are also largely steering clear of the new vehicle market in favor of the generally more affordable pre-owned vehicle market, at least for the time being.

And so, if a large proportion of the types of hybrids and EVs that car buyers in the 18-24 age group are interested in remains largely made up of new and upcoming vehicles, combining the relatively higher cost of new vehicles and the relatively higher cost of hybrids and EVs may be locking out buyers 18-24, whose budget and credit may drive them towards less economically straining alternatives: used cars (many of them gasoline-fueled cars by default), and more affordable gasoline-powered cars. 

Case in point: When asked about their budget for their next vehicle purchase, nearly 60% of buyers aged 18-24 responded that it was under $25K, effectively pricing them out of the new vehicle market for hybrids and EVs. That number dropped to the mid-to-low 40% range for buyers between 25 and 54, before plummeting to 36% for buyers 55-64, and below 30% for buyers 65 and older. In the end, buyers in the 18-24 age group were twice as likely as their 65+ counterparts to be limited to a budget of $25K or less for their next vehicle purchase.

 

Does the cost of gasoline also play a role in the economics of car buying?

Does the high price of gasoline also play a role in the economics of hybrid and EV car buying? The short answer is yes, but for many consumers, not yet enough to offset the high upfront (or monthly) cost of buying a more expensive car. We will soon dive into our data on key drivers of hybrid and EV adoption among consumers, and what it says about the role that high gasoline prices play in shifting purchase intent towards hybrids and EVs. In the meantime, think of this question as one of both a short-term and long-term pain-at-the-pump, and as a variable economic challenge versus a non-variable economic challenge. 

Short-term pain at the pump versus long-term pain at the pump can be somewhat of an abstraction for car owners: Gasoline prices go up, gasoline prices go down, and there is no way to really gauge precisely how bad or not so bad things will get in the next two to five years. The economic strain caused by high gas prices today could be offset by low gas prices six months from now, or two years from now, or five. The variable nature of gas prices makes pain at the pump a factor in the decision to eventually switch to hybrids and/or EVs, but that argument may come and go based on where gas prices happen to be at any given time. It’s a fickle motivator.  

Unlike gasoline prices, however, monthly car payments, vehicle taxes, and insurance premiums, are not especially variable. These expenditures tend to have a more significant impact on the real cost of vehicle ownership than fluctuating gas prices. Regardless of how high gas prices get, many consumers simply cannot afford high monthly car payments, high vehicle taxes, and high insurance premiums, especially during their early adult years, when they are still building their credit and have not yet tapped into their full earning potential. Therefore, a vehicle’s sticker price tends to be a more important factor in many car buying decisions than fuel prices, particularly among younger car buyers.

We also note that car buyers in the 18-24 age group are less likely than their older counterparts to be homeowners yet, and may therefore, in addition to other challenges already mentioned, be less likely to enjoy unrestricted access to charging stations (including the ability to install one) where they live. This additional layer of challenges is likely to also make owning an EV less practical than owning a gasoline-powered car, at least at this juncture, steering them towards the temporary convenience of gasoline-powered vehicles.

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