Young Buyers Look Overseas for Cars

It's no surprise that Detroit is struggling to retain market share, but its key challenge is luring younger buyers

by Jim Henry

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When was the last time you saw a 25-year-old driving a Buick that didn't belong to his grandparents? Or, for that matter, a senior citizen tooling around voluntarily in a Scion tC? Import brands dominate a list of models with the youngest buyers—averaging 40 years old or younger—while models from Detroit are most popular with drivers over 60. That's a big problem for the Detroit Three, which need to conquer more import buyers as foreign brands attract, and keep, younger customers.

By now, anyone who can see lightning and hear thunder is aware that Chevrolet is advertising the redesigned 2008 Malibu on TV, in print, in outdoor advertising, online, and generally everywhere as "The Car You Can't Ignore." But young people have roundly ignored the Malibu for years and, pickups and SUVs aside, it isn't the only U.S.-made car that should be feeling snubbed.

Domestic brands like Chevrolet have to "disrupt" that pattern and get themselves noticed, said Ed Peper, Chevrolet's general manager, in a presentation to the International Motor Press Assn. on Oct. 18 in New York. In plain English, that means U.S. carmakers must figure out a way to get, and hold, the attention of younger buyers with models that offer the looks, quality, reliability, pricing, performance, and fuel economy coming out of Asia and Europe.

For 2007, market share for the Detroit Three brands, at 51.2% year-to-date through September, is barely above 50% of U.S. light-vehicle sales. That's down from 54.1% in the year-ago period and 63.2% just five years ago, according to Automotive News. At the same time, Japanese, European, and Korean brands have benefited from Detroit's loss.

Young Urban Trendsetters

That's across the whole market, but when you zero in on age demographics it becomes increasingly clear in which segments Ford (F), General Motors (GM), and Chrysler are hurting most: the highly desirable buyers who are 35 and under. According to recent statistics from the Power Information Network, Toyota's (TM) tiny Scion tC has the auto industry's youngest buyers, with an average age of 35. In fact, breaking it down by age, the models that attract the youngest buyers are all imports.

At the other end of the spectrum, PIN's data shows that the spacious, but unhip, Lincoln Town Car from Ford has the highest average age, with buyers averaging 69 years old. It's not that Detroit, or any automaker, doesn't want older buyers. But the goal of focusing on younger buyers is to encourage brand loyalty. If you buy a Toyota now, you might move up to a Lexus later as your earning power increases. If Ford or GM can't capture drivers young, they may never get them.

PIN gleans data from millions of auto loans and leases filed at dealerships across the country. Age statistics are for owners who bought or leased a vehicle from January through the end of September. PIN is a subsidiary of J.D. Power & Associates. (J.D. Power and BusinessWeek are both divisions of The McGraw-Hill Companies (MHP).)

Toyota created the Scion Div. in 2004, specifically to attract younger buyers. "Scion is heavily marketed to young urban trendsetters via mostly nontraditional means, so it is not surprising that the tC has the youngest customer profile in the industry," says Toyota spokesman Wade Hoyt.

The tC's average age of 35 is a little misleading. The biggest age group of Scion tC buyers is around 22 to 23 years old, according to PIN. There is another large group of owners around 48 years old, but relatively speaking, few are 35.