Gen Z Is Over Tesla, Still Loves Apple: Morgan Stanley Survey Reveals Shifting Trends
The Tesla, Inc. TSLA brand is losing its cool among Gen Z, while Apple, Inc. AAPL continues to reign supreme, according to a new survey by Morgan Stanley. The report, released Sunday, surveyed 575 summer interns, who represent the next generation of business leaders, and their responses highlight a significant shift in consumer preferences.
Key Takeaways:
- Gen Z Prefers ICEs Over EVs: The survey revealed a surprising trend: young consumers prefer gasoline-powered cars over electric vehicles by nearly a 2:1 ratio. This preference for Internal Combustion Engines (ICEs) has been growing for two years, marking a decline in enthusiasm for EVs.
- Tesla’s Cool Factor Fading: Tesla’s once-dominant "cool factor" is waning. Only 11% of respondents named Tesla as the most desirable brand, down from 14% last year and a staggering 30% in 2021. This decline has benefited Mercedes-Benz Group AG MBGAF and Bayerische Motoren Werke AG BMWYY, which are now the most desired brands by 19% and 15% of respondents respectively.
- Apple’s Dominance Endures: The survey found that Apple continues to dominate the smartphone market. A whopping 93% of respondents own an iPhone, driven by its strong battery life and seamless integration with other Apple devices. However, Gen Z’s interest in Artificial Intelligence (AI)-powered features remains low, suggesting that Apple might need to focus on AI to maintain its dominance in future upgrade cycles.
- Investment Implications: The survey results have led Morgan Stanley to lower its 2030 EV penetration forecast from 25% to 20%. This suggests that the transition to a fully electric vehicle market might be slower than previously anticipated.
The Rise of ICEs and the Decline of Tesla’s Cool Factor
The survey’s finding that Gen Z prefers ICEs over EVs challenges the prevailing narrative surrounding the future of the automotive industry. This shift in preference could be attributed to several factors:
- Range Anxiety: Gen Z may be skeptical of EV’s limited range, particularly when traveling long distances. Concerns about charging infrastructure availability and time might dissuade them from choosing EVs.
- Cost Factor: EVs are typically more expensive than comparable ICE vehicles, and the current economic climate might be pushing young consumers towards more affordable options.
- Environmental Concerns: While climate change is a significant issue, Gen Z might feel that the current state of EV technology and production doesn’t fully address environmental concerns. This could lead them to prioritize other factors like affordability and performance.
Tesla’s declining "cool factor" is another noteworthy trend. The brand was once seen as the epitome of innovation and sustainability, but its recent struggles with quality control, production delays and Elon Musk’s erratic behavior have tarnished its image. This loss of appeal among Gen Z could significantly impact Tesla’s future growth prospects.
Apple’s Enduring Dominance and the Vision Pro Challenge
Despite the rise of competing brands like Samsung and Google, Apple continues to hold a strong grip on the smartphone market. Gen Z’s loyalty to the iPhone is rooted in iOS, Apple’s proprietary operating system, which offers a user experience that is perceived as intuitive and user-friendly.
However, Apple’s future success might hinge on its ability to embrace AI-powered features and technologies. The survey revealed that Gen Z doesn’t prioritize AI features when choosing a smartphone, which could indicate a disconnect between Apple’s vision and the needs of its future customers.
The Apple Vision Pro augmented reality (AR)/virtual reality (VR) headset is another test of Apple’s appeal to Gen Z. This innovative product has received mixed reviews, and the survey results indicate that only 1% of respondents have purchased it. While the headset is still relatively new, its high price point and limited functionality might be hindering its adoption among Gen Z, who are known for their price sensitivity and preference for value for money.
Implications for the Future
The Morgan Stanley survey provides valuable insights into the evolving preferences and attitudes of Gen Z, which are shaping the future of major industries.
- The Future of Mobility: The shift in favor of ICEs suggests that the transition to a fully electric automotive landscape might take longer than anticipated. This could create new opportunities for traditional car manufacturers while also emphasizing the need for continued innovation in EV technology to address range anxiety and affordability concerns.
- The Role of AI: The survey highlights the importance of understanding Gen Z’s expectations and needs regarding AI features. As AI technology continues to evolve, brands like Apple need to integrate it into their product offerings in ways that resonate with this tech-savvy audience.
- Sustaining Brand Loyalty: Tesla’s decline in popularity among Gen Z underscores the importance of maintaining brand image and reputation. Companies need to consistently innovate, address consumer concerns and build meaningful connections with younger audiences to ensure long-term success.
The survey’s findings offer valuable lessons for businesses across various industries. Understanding the evolving preferences and needs of Gen Z will be crucial for adapting to the changing landscape and securing future success.
