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How Car Companies Are Trying to Win Back Millennials

Get ready for the dashboard selfie.

Volkswagen's Ewald Goessmann and Chuhee Lee line up a selfie at the carmaker's Electronics Research Laboratory. (David Zax)

BELMONT, Calif.—"Smile!" says Korina Loumidi, snapping a selfie of the two of us on her iPhone. In the past hour, I've wandered through a Silicon Valley office building with all the trappings of one of the hot tech companies in the neighborhood: Google, Facebook, Apple. I've seen whiteboard walls scribbled on with marker, pool tables and ping-pong tables, a cluster of 3D printers, and an Xbox-equipped TV. Each room throngs with young employees, who like Loumidi are mostly in their late 20s, exhaling the entrepreneurial energy that hangs in the Northern Californian air.

Only I'm not at a tech company—and certainly not one that was recently a scrappy startup. I'm at a research outpost of Volkswagen, the 77-year-old German car company, and the iPhone on which Loumidi has just snapped our selfie is mounted to the dashboard of an "iBeetle," a new VW model that was designed in collaboration with Apple. The iBeetle app she's demonstrating—which, on top of a specialized selfie feature, integrates with the owner's Spotify, Facebook, and Twitter accounts—represents the latest attempt of a major car company to win back the attention of the next generation of would-be car buyers, many of whom are far more interested in the specs of the next iPhone than those of the next VW.

Research bears out the suspicion that Millennials, the generation born between the late 80s and the early 2000s, are less interested in cars than their parents were. People between the ages of 16 and 34 drove 23 percent fewer miles on average in 2009 than in 2001—"a greater decline in driving than any other age group," per U.S. PIRG. According to the New York Times, the Federal Highway Administration has further found that only about 46 percent of potential drivers 19 and younger had driver's licenses in 2008, down from about 64 percent in 1998. Trend pieces trot out variations of these statistics every few months, but the upshot for car makers is always the same. "We have to face the growing reality that today young people don't seem to be as interested in cars as previous generations," Toyota USA President Jim Lentz has said. Or, as U.S. PIRG's Phineas Baxandall has put it, starkly: "Millennials aren't driving cars."

There are all sorts of reasons why Millennials might be less interested in driving. Most simply, the recent recession dampened the purchasing power of many young people and their parents, and cars are expensive. It's also true that Millennials have a growing affinity for cities, where alternative transportation options are rife.

But a third trend underlying Millennial disenchantment with cars, according to many, has to do with the rise of online life. One recent study noted that Internet users, in particular, were less likely to have driver's licenses. A Zipcar-funded study found that about 40 percent of Millennials would rather lose access to a car than to their smartphone or laptop. Young people today are more excited by the latest product announcement from Apple than from Ford. The gleam is off the car and on the iPhone, which has automakers scrambling to get it back.

•       •       •       •       •

If Millennials are too busy taking selfies to care about cars, then perhaps an ability to snap selfies in cars could lure them back? That's the insight of Loumidi's app, and it's this third trend—tech obsession—that the VW Electronics Research Laboratory I'm touring is meant to address. Based in Belmont, California, ERL is just a 20-minute drive up Route 101 from the campuses of Facebook, Google, and Apple. VW has decided that if it can't beat the smartphone set, it will join them; indeed, it works hand-in-hand with several nearby companies, even having one employee embedded full-time with the chipmaker Nvidia.

Though overrun by twenty-somethings like Loumidi, at ERL my main tour guides are Ewald Goessmann, the lab's executive director, and Chuhee Lee, its deputy director. At 49 and 38 respectively, Goessmann and Lee are uncharacteristically old as far as ERL employees go, and there's something of the feeling of a pair of college professors wandering among their students as we progress through the lab. Both have a youthful energy, though, and wear stylish fitted shirts that would make them at home among startup founders. Goessmann has only recently assumed this position, after years working for Audi (a VW-owned brand) in his native Germany. "Even two months here have been inspiring to me," he says of the move to Silicon Valley. "Every week you get new ideas."

Volkswagen has decided that if it can't beat the smartphone set, it will join them; above, the Goessmann and Lee selfie is finished. (Courtesy VW)

There is a decades-long tradition of car companies having design studios in Southern California, where the strong driving culture has proved fertile for automotive innovation. It's only in the last 15 or 20 years, though, that car companies have increasingly spun off outposts here in Northern California, to capitalize on and connect with the tech industry. In 1998, VW became the second to open a research arm hereMercedes was first, in 1994and ERL, with its 140 employees, remains the second-largest after the Mercedes lab.

A Wonka-esque energy infuses ERL. On one floor, a group of young researchers contemplate new ways to connect drivers to events in their area, scribbling notes on panels of frosted glass that double as a whiteboard. On another, a roomful of 3D printers hum, ready for rapid prototyping of ideas as they come to engineers. On another, social scientists tool around on a pair of driving simulators—one made from the sawed-off front half of an Audi A7, propped in front of a triptych of widescreen TVs—preparing to test a new in-car interface they hope could reduce distracted driving among Millennials. They won't show it to me, alas, since car companies are notoriously secretive about products in the near horizon.

In a ground-floor garage, though, a 31-year-old engineer named Michael Buthut shows me a more distant-horizon ideas, something more research than development. Buthut is tasked with responding to trends in technology; one of these, he notes, is the fact that we are all generating increasing amounts of data, more than we know what to do with. We have less trouble recording moments of our lives, but more trouble sifting through them and retrieving the important ones.

This may seem unrelated to driving, but in fact we generate data everywhere—and sometimes unsafely. If you've given in to the temptation of snapping a photo while on a particularly scenic drive, you're not alone (and distracted driving is particularly prevalent among Millennials). But what if there was a way to focus on the road, Buthut asked, while your car took your pictures for you?

A Wonka-esque energy infuses ERL. On one floor, a driving simulator made from a sawed-off Audi A7 helps test a new in-car interface to reduce distracted driving among Millennials. (David Zax)

Next to Buthut is a VW Golf with four GoPro cameras mounted to the roof. The GoPros are rigged to take pictures every five seconds, generating 32 GB of data during a two-hour drive, a daunting number of photos for any human to sift through. But VW collaborated with the startup wise.io to create an algorithm that trains a computer (based on a set of human-rated pictures) to know which photographs are most likely to appeal to you. Buthut showed me how the algorithm pored over reams of photos from a recent drive, discarding bland, blurry street views and distilling the set to a handful of postcard-ready shots of gorgeous, hilly landscape. It's the sort of thing to make an art photographer squirm, but it may work well enough to discourage young drivers from clicking-and-driving.

Another idea Buthut and his team are working on is called "smart accessories," which envisions a future where your valuables are embedded with Bluetooth chips that communicate with your car to prevent theft (among other uses). In true Silicon Valley fashion, Buthut wasn't entirely sure what would come of this idea; he just knew that it was cool. Nevertheless, he did show me one "use case," in the tech world's jargon: handing me his Pebble smartwatch, he grabbed a chip-embedded surfboard from the Golf's roof rack and made off with it like a bandit. Once he reached a certain distance, the car's lights began to flash, and the Pebble watch pushed me a message: "Alert! Your surfboard is missing!"

•       •       •       •       •

Volkswagen isn't the only car company worried about Millennials' dwindling affection for cars. Various brands have been responding to the trend in different ways. Some seem to feel that better outreach is just as important as design; GM hired a "youth emissary" named John McFarland some years ago (though GM says his role has since changed); it also retained a consultant from MTV to figure out what kids today were into. Ford, a latecomer to the Silicon Valley R&D game (it only moved to create its own lab there in 2012), nonetheless teamed up with Zipcar to popularize its vehicles among college students. And though Honda did redesign the Fit mini-car partly to appeal to Millennials, its strongest pitch came in the form of internet-friendly videos featuring a BuzzFeed-ready meerkat.

But if most brands seem to be focusing on Millennial marketing for now, there’s still no shortage of eye-popping, futuristic design ideas like the kind VW is playing with. The question, though, is how many of these ideas will actually make it to market. Back in 2011, Toyota presented a car at the Tokyo Motor Show that it called the "Fun Vii." If other car companies were interested in integrating vehicles with iPhones, Toyota's design, originating at its Calty design lab in Newport Beach, California, seemed more like an attempt to turn your car into an iPhone.

The Fun Vii is a vision of a sleek car that has all the design appeal of your smartphone. The exterior and interior of the car itself are composed of giant, illuminated display panels; you can actually change the color of the car with the press of a button. The Fun Vii excited wide swaths of the press, garnering coverage in outlets that usually overlook car news. "It struck a pretty cool chord with the general public," says Alex Shen, Calty's studio chief designer.

The only problem? You can't buy it. There was one copy made for the auto show, but it wasn't even designed to be driven safely on public streets. It was what the auto industry calls a concept vehicle, which Calty's Andrew MacLachlan loosely defines as a car company's "dream of what could be." Any given concept vehicle is typically a suggestion of what could be on the market in 10 or 15 years. Though that time horizon may seem distant, that's actually when many Millennials may come into their own financially and be more willing to buy cars.

Toyota's Fun Vii concept car has all the design appeal of your smartphone. (Chad Horwedel / Flickr)

This time lag underscores one of the challenges of designing cars for Millennials, whose tastes can change with the weather. It's tough, says MacLachlan, but while there are "fashions and trends, there are values as well, and values change very slowly." Toyota has conducted some of its own research to try to identify what these values are, particularly for the younger half of Millennials, sometimes called Generation Z. Calty concluded that three features of Generation Z are most salient when projecting what they'll like in the future: this generation is digitally native, assertive about its green lifestyle, and a "creator generation" that wants to craft and customize both their digital and physical spaces. This, at least, is the moving target Toyota thinks it sees in the distance.

"It's kind of guesswork," says MacLachlan. "No one can tell five years from now what events will alter who we are, or our culture. But there are elements you can look at that don't change so much."

•       •       •       •       •

I think about this balancing act of timescales—juggling what's possible now with what the market may be in the future—at VW's ERL, as Chuhee Lee walks me through a kind of prototyping graveyard. He reaches up to a shelf, showing me a black robotic device resembling the head of Pixar's Wall-E. "AIDA," or the Affective Intelligent Driving Agent, was created in conjunction with MIT to "explore new vehicle-driver relationships." But as VW continued to work on iterations of this and other physical avatars, smartphones took off, Siri was born, and the company eventually decided a dashboard-mounted robo-head wasn't such a great idea after all.

In fact, it seems that one of the smartest things car companies can do when trying to appeal to Millennial tech habit is simply to design their cars in a way that makes them accommodating to the innovations of other companies. The lifecycle of a car design is five years, but Tim Cook takes the stage every year or so to tell us about the new iPhone.

Years back, VW developed a black robotic device resembling Pixar's Wall-E, but the company abandoned the dashboard-mounted robo-head after Siri took off. (David Zax)

You can hardly blame car companies for lagging. Facebook can take up the rallying cry "move fast and break things," but VW can never have that luxury. With cars, "you want to go fast, but never break!" says Lee. A software company can rush out a program, then have customers download an update when glitches are found. Car companies can't do this. If they try anything similar, their customers die, and they face Congressional inquiry.

With this underlying reality, I found myself most impressed by the innovations that enabled VW to simply accommodate the rapid waves of the consumer electronics industry. Lee and Goessmann explained, for instance, how VW is designing its next wave of cars with the on-board computer as a separate module, making it easier to introduce new hardware through the five-year span of a particular car model. Previously, car and computer were so intertwined that someone buying a car in 2010, say, might be stuck with the same in-car electronics as someone buying in 2006.

For all of the frantic effort of car companies to reclaim coolness from Apple, they seem at their best—and most Millennial-savvy—when they come to a Zen-like acceptance of the tech world's ascendance. Which is why when Loumidi snaps our selfie in the iBeetle, it's the first time that I (an admittedly old Millennial, at 30) see an innovation that actually stimulates my appetite for car-buying. It's less the selfie feature I find alluring—though that's fun—and more the elegance of the underlying iPhone integration: a basic dash-mounted dock; an app whose elemental features (music, social media, the ability to time my drive) are designed with jumbo icons I can take in easily with the briefest glance from the road.

And it's this innovation that lingers in my brain as I pull out of ERL in my rental car, struggling to hear directions my iPhone barks at me from the cup-holder at my elbow. It now strikes me as barbaric to have a car that doesn't integrate with my iPhone so seamlessly. For VW to have tapped into that hallmark of the tech industry—the ability to create dissatisfaction with products merely a few years old, even if they work passably well—it must be doing something right.

This article is part of 'The Future of Transportation,' a CityLab series made possible with support from The Rockefeller Foundation.

About the Author

  • David Zax
    David Zax is a contributing writer for Fast Company whose work has appeared in many publications, including Smithsonian, Slate, Wired, and the Wall Street Journal. He lives in Brooklyn.