Aug. 6 (Bloomberg) -- Young people are buying cars at a slower rate than their parents, restrained by mounting student loan debt, a rising cost of driving and an increasing reliance on biking and public transportation. Car companies continue to chase them, banking on the hope that today’s car-shirkers will be tomorrow’s car-buyers.
They are trying to attract the 18-to-34-year-old millennial generation through a blend of social media campaigns, video game placements and peer-to-peer advertising. It’s the 21st century equivalent of putting a Hot Wheels car into a box of Frosted Flakes.
“This audience is their future,” said Michelle Krebs, a senior analyst at Edmunds.com. “It’s absolutely critical that automakers try to get this market now.”
Nissan Motor Co. has sponsored virtual versions of its all-electric Leaf in the Sim City video games. The digital inhabitants get higher “happiness” levels when players add a Leaf or a charging station to the cities, said Vinay Shahani, Nissan’s U.S. director of marketing communications.
The goal is to put positive images of the brand in young consumers’ minds when they are in their teens and 20s so they gravitate toward Nissan models when they get into the auto market in their 30s, Shahani said.
“It’s about promoting a lifetime customer progression in our portfolio,” Shahani said.
For automakers, the marketing expense is a down payment.
“It may be a long-term endeavor to appeal to younger drivers because a lot can’t afford new vehicles now, but they will a few years down the road,” said Ed Kim, an industry analyst at AutoPacific Inc.
Sean Kennedy, a recent graduate of Western Michigan University, turned down his mother’s offer of her old car when she upgraded to a newer model a few years ago. Biking has served as a more affordable and sustainable commuting option.
“I was thinking about starting to save up for a car, but I thought I probably won’t have enough money for a car for another three or four years,” said Kennedy, 24. “Once my other student loans kick in, I won’t be able to afford car insurance, gas.”
Scion, Toyota Motor Corp.’s youth-centric brand, has employed promotional tactics including sponsoring rock concerts and entrepreneurism think tanks. The median age of drivers in Scion’s lineup is 37, according to company data.
Millennials have practical car-buying concerns -- getting a good value, having a car small enough to navigate urban areas and making sure it hooks up with the latest gadgets, said Liz Elser, brand manager for Ford Motor Co.’s Fiesta, at a media event in June. They generally prefer to hear about those features from friends and followers than from automakers, she said.
Millennials account for 25 percent of Fiesta’s buyers, Elser said. Twice, when Ford has released a new version of the car, a group of 100 young adults has earned the chance to drive one of the cars for eight months as “agents” of the Fiesta Movement campaign. They upload pictures, blog items and Twitter posts, as well as make appearances at high-profile events, including the X Games and productions of “American Idol.”
Chevrolet’s share of buyers under age 25 increased 1.5 percentage points from 2011 to 2012, led by gains among the brand’s compact Cruze, Sonic and Spark, said Cristi Vazquez, a Chevrolet communications manager. The company has targeted the small cars to millennials through YouTube campaigns and promotions with the Billboard Music Awards and with skateboarder Rob Dyrdek.
Student-loan debt among Americans under 30 nearly doubled to $322 billion in 2012 from $162 billion in 2005, according to the Federal Reserve Bank of New York. And the average cost of driving increased 18 percent during the past decade, according to AAA, the motorists’ club.
Michael Sivak, a research professor at the University of Michigan Transportation Research Institute, has found a shift in the peak age of vehicle buyers -- from 35-to-44 in 2007 to 55-to-64 in 2011. That trend could be here to stay and spending marketing dollars on millennials may be misdirected, he said.
Krebs, of Santa Monica, California-based Edmunds.com, disagrees, saying that early evidence shows that the rate of millennial car purchases may be picking up. The 18-34 age group fell from 14.5 percent of new-car registrations in 2008 to 10.6 percent in 2011 before rebounding to 12.4 percent last year, according to R.L. Polk & Co. The gain last year outpaced all other age groups, and millennial buyers are continuing to come back this year, Krebs said.
Trenton South, 28, of Cincinnati, bought a metallic gray 2012 Chevrolet Sonic Hatchback last spring. The car won him over as he paged through online auto forums and watched Fast Lane Daily car reviews before breakfast. Its flashy online advertising campaign first caught his eye.
“It had a huge ad push -- bungee jumping, flying out of a plane,” South said. The car’s fuel economy, six-speed manual transmission and American make “checked everything in the box,” beating out his two other contenders, the Mini Cooper S and Subaru WRX.
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