Not Buying It
The Big Three auto companies have a hard time selling to young people.By Blake Thorne
December 22, 2008
A balloon advertises a special price on a pickup truck at a Ford dealership. (AP Photo/Elaine Thompson)When Christopher Andrews saw the ad for Kia Sedonas at $289 per month this fall, he was skeptical. The Michigan high-school teacher’s knowledge of Kia extended little beyond some negative hearsay. He worried the vehicles were cheaply built or that the low financing rate advertised wouldn’t be the bottom-line price.
“That is kind of the mindset that a lot of people had,” Andrews said. “Initially, I thought ‘Kias are probably not that good of quality because, you know, they’re cheaper, they’re a lot less expensive.’”
At 36, Andrews is sitting just on top of the age bracket most of the auto industry uses to measure the youngest market of buyers, 16-35. Like many first-time car buyers, price was a main priority, as was finding something safe and the right size for his young family.
Andrews walked through the new and used lots remembering the troubles his previous pickup truck, a Dodge Dakota, gave him. “I kind of had a bad taste for Dodge in my mouth,” he said. “And the other domestics, they’re not really making vans right now.”
After weighing the options of a buying a domestic with a few thousand miles on it, or a new Kia Sedona for the same price, Andrews went with the Sedona. He’s one of many young auto buyers who are no longer willing to pay the premium for an American-made car.
It’s no secret that the Big Three are in serious trouble. With record-low sales, unpopular vehicles, and a customer base creeping toward Asia, it’s uncertain if even the $17.4 billion federal loan package can save the “dinosaurs,” as Alabama Republican Sen. Richard Shelby calls them. If the domestic auto industry survives the recession, it will likely be at the hand of industry-wide innovation. Innovations that could deliver smaller, more affordable models, the kind that attract the youngest generation of auto buyers. But if the web-savvy, 35-and-under set continues to reject American cars, Detroit’s lifeline could be shorter than expected.
According to research from J.D. Power & Associates, not one of the ten models most popular with 16-35-year olds in 2008 is domestic. The list, topped by Toyota’s Scion tC, includes five Volkswagens, two Mazdas, a Subaru, and a Mitsubishi.
“These cars have created an image as brands that appeal to the young buyer,” said Tom Libby, senior director of industry analysis for J.D. Power & Associates. “Part of it is price, there’s no question, but part of it is image, also.”
These Millennial generation cars have more in common than image. They tend to be less expensive—the base MSRP for a 2008 Scion tC is $17,000. And they are usually smaller. All the cars on J.D. Power’s list are classified as compact vehicles.
Even when Detroit produces smaller or cheaper cars, it often struggles to break the image barrier. On paper, the Ford Focus is everything the Volkswagen Rabbit is. Both have base MSRPs at around $15,000, and are similar sizes, boasting a curb weight at under 3,000 pounds. But with twenty-somethings and young families, the Rabbit has outseld the Focus year after year.
“The Focus is a competitor to the Rabbit and so on,” Libby said. “But the Focus is a Ford and Ford doesn’t really have the image that appeals to the young buyer the way the Volkswagen brand has an image.”
Image was a factor, along with price, when 23-year-old recent college graduate Brian Westmoreland bought a 2008 Volkswagen GTI, his first new car. “I was looking for cars that were under $25,000 and that were hatchbacks, and that pretty much eliminated American cars,” Westmoreland said.
Westmoreland is a mechanical engineer and was raised in the Lansing, Mich. General Motors based much of its manufacturing operation in Michigan’s capitol, but the city has seen more and more of those factories disappear. Despite this, Westmoreland didn’t feel obligated to buy American. In fact, he felt the opposite. “[The Big Three] just didn’t make smart choices like a lot of foreign manufacturers did,” he said.
Westmoreland, along with Andrews, is part of the first wave of a new breed of auto buyer, one who brings research to the car dealership.
Joanne Helperin, senior features editor of auto information resource Edmunds.com, compared it to the swell of educated, connected young voters who were a surprising force in the 2008 presidential election.
“There was a time where, if you were a young buyer and you walked in [to a car dealership] on your own, they would say, ‘hey where’s your dad?’” Helperin said. “Young people are now armed, they are not dependent on mom and dad for the information about what a car should cost, what options are available, right down to the nitty-gritty. They are very much aware of what they want.”
To their advantage, these buyers are able to communicate and compare with other buyers to be sure they get the best deal and the best car. The days of learning about a new sedan from the salesman and guessing if the sticker price is fair are gone. Though not exclusive to young buyers, the Internet is proving to be a powerful market research tool.
Though firing hard on the technological cylinders, 29-year-olds with iPhones aren’t exactly overhauling the massive automotive marketing machine. Not just yet. Today’s power demographics in the showroom are middle-aged and older consumers. The under-35s are still relatively unimportant to the Big Three.
“Ford and Chevrolet have a wide reach of consumer demographics,” Libby said. “But none of [the domestic companies] are really focused on young buyers.”
It’s hard to speculate what this generation will do in terms of product loyalty. If brand-retention is as strong as it was with the baby boomers, names like Volkswagen and Mitsubishi could start outnumbering domestic cars in American parking lots.
“Those brands or manufacturers who capture young buyers will have a better chance of retaining them as they grow older than the other brands will of conquesting them,” Libby said. “It will also be cheaper to retain them than to conquest them.”
Should American auto outlive its current troubles, the new concern could be today’s young customer. What happens when they graduate into the older, primary car-buying demographic and they’re still buying Scions? “It is a serious concern,” Libby said.
Blake Thorne is a senior at Western Michigan University.
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Comments
Great article.
Though it’s not clear, I believe that the J.D. Power ranking is based on the percentage of a model’s buyers within the age bracket, not the absolute number of buyers.
So these aren’t the cars young people are most likely to buy in absolute terms, just those they’re most likely to buy when compared to people over 35.
In some cases models might be on this list because they sell poorly to people over 35.
That said, I operate vehicle information site truedelta.com, and find that many people who research cars online simply don’t even look into the domestics.
— Michael Karesh - Dec 22, 08:31 PM - #