Back in May, Fast Company questioned whether Mercedes’ focus on catering its lineup to a suburban America was a shrewd tactic or wishfully daft. It didn’t gain a lot of attention, but the impact of shifts in people’s living situations on car companies’ product planning and overall strategy cannot be understated.
“The myth is that people are tired of suburbs and moving into cities. That is simply not true,” stated a blunt Eric Larsen, director of Mercedes’s society and technology research group.
The Brookings Institute explains that the recent slump in suburban growth can be mainly attributed to a still-rebounding housing market. They conclude, somewhat blandly, that the general cycle of city-dwellers eventually moving to suburbs will continue to occur as it has in the past. Over the next decade, they forecast suburban growth to potentially climb higher, with urban areas continuing to experience growth as well. The below graph from Brooking can be misleading – suburbs aren’t shrinking, they’re definitely growing. Just not at the rate of certain urban cities.
Mr. Larsen summarized, “The U.S. is a unique market, with the rise of mega-suburbs, not mega-cities. It’s good news for our company.”
Later, I posed Fast Company’s question to Neil King, an automotive contributor at EuroMonitor. He agrees with Mr. Larsen that the US is a distinctive market in which Americans love owning all four walls for some reason. Shifts in urbanization notwithstanding, he believes that changing demographics of the inhabitants to be the most important changes for companies to adapt to.
Mr. King explains that more women in the workforce, lower birth rates, and later marriages mean smaller households which translates into smaller car needs. Shifts towards home delivery and online retailing further decreases the need for large SUVs, paving the way for the likes of the Audi A3s, BMW 2s, and Mercedes CLAs to make up a much larger volume of the yearly luxury purchases.
Interestingly though, new Chevy Tahoe sales are growing at healthy rates, BMW continues to bear down on the luxury SUV market with the massive X7, and S-Classes are practically selling as fast as Daimler can make them. Whatever the case may be, some variable is seriously missing in this equation.
To view the original article from Fast Company, click here.