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On the Inside
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| Ready or not, here come the kids |
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| Updated |
Jun 10, 2004 22:00:14 |
| Rating |
 31 ( -6 -19.35% ) | | Author | Paul Eisenstein |
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When did I wind up on the wrong side of the demographic curve?
With my 49th birthday sneaking up in a matter of days, I'm smack in the middle of the largest and-for retailers-the most desirable group of consumers in American history. From the time we started earning an allowance, marketers had us in their gun sights, giving us a sense of privilege and empowerment.
Nowhere was that more true than in the auto industry, where such strong players as Volkswagen, Toyota and Honda owe a significant portion of their success to the loyal cadre of Boomer buyers who transformed them from insignificant imports into some of the world's most powerful brands.
Even with the advent of Generation-X, Baby Boomers remained a force to be reckoned with. Of course the so-called Baby Bust just wasn't that big, so it was a matter of following the money. But now, just as the post-War generation enters its peak earnings years, there's a whole 'nother generation posing a clarion call that auto manufacturers can't seem to ignore.
Whether you call them Generation-Y, Echo Boomers or Millennials, they're about to out-number my generation. By decade's end, industry forecasts say they'll be 70 million car buyers strong. True, plenty of them will still be living at home, or struggling to come up with college tuition, but those are nonetheless powerful figures.
A pampered generation well trained in the ways of consumerism, they've got their own music, films, running shoes and extreme sports equipment. Soon they'll have their own cars and even their own automotive marque. But while the Millennials are showing a lot of respect for brand names, they aren't necessarily putting a premium on the brands their parents chose. No surprise. The generation raised on Viet Nam-era protests rejected most everything their parents stood for, as well.
So, while imports like Toyota want to repeat their past success, there's no guarantee they can pull it off. And that's creating a potential opening for some new nameplates, especially Korean brands like Hyundai-as well as the old-line domestics, who desperately hope not to miss out on the Millennials, as they did with the Boomers.
The competition has been underway for some time, gradually intensifying, but it burst onto the radar screen, like a stealth bomber suddenly uncloaked, during the recent New York Auto Show.
It's been one of the auto industry's worst-kept secrets that Toyota has been looking to create a separate division aimed at youthful buyers, much like Lexus targeted an older and more affluent niche. The new Scion brand unveiled in New York doesn't go quite that far. Call it, if you will, a "division-within-a-division." When it formally opens in 2004, Scion will have a place of its own inside existing Toyota showrooms. At least half of the automaker's U.S. outlets are expected to sign on for the rolling introduction, which will start-naturally-in California, and then spread like a wave eastward.
On the Inside
Ready or not, here come the kids
---Paul Eisenstein
According to the dictionary, "scion" translates as "dependent," or "heir." Trying to define what the Millennials will buy won't be nearly as easy, concedes Jim Lentz, the graying Baby Boomer running the new nameplate. "Right now," I don't think anyone knows what this customer wants." Scion offered up two strikingly different possibilities. The ccX concept vehicle is a sharp-edged sports coupe, while the bbX is a boxy, van-like crossover vehicle offering up plenty of places to store "stuff."
Apparently, that's the same thing Honda designer Eric Schumaker took away after spending three years closely studying a select group of Echo Boomers, whom he says "work to live, (rather than) live to work." They like to haul their sports gear, toys and necessities, Honda is betting, as it gets ready to roll out its first pitch to the Millennials. Dubbed Element, Honda officials liken it to a mobile dorm room or base camp.
Will the boxy look succeed? Pontiac was betting on it with the Aztek, one of the biggest flops in recent years. But General Motors has had an unenviable knack of missing the youth market over the last 30 years, a key reason why its share of the U.S. market has plunged by nearly half since Boomers hit driving age. GM even tried its own version of Scion in the '80s. But it eventually pulled the plug on Geo, which tried selling rebadged Japanese imports, such as the Isuzu-made Storm, through Chevrolet showrooms.
The domestics, as a group, haven't connected very often with young buyers. Chrysler's PT Cruiser has been a smash hit, drawing in far more Boomers than expected, but few buyers under 25. That could change, the automaker hopes, when it rolls out a peppy new turbo model this coming fall, and a convertible Cruiser in 2004.
Probably no automaker has had more of a yo-yo ride than Volkswagen. Its original Beetle and Microbus models were the very symbol of the '60s counter-culture. When VW quit selling those youthful models, sales began a steady, downward plunge, hitting just 50,000 in 1992. Off from a peak of 600,000, VW seriously considered pulling out of the U.S.
Instead, it resurrected the Beetle--and the quirky ads that captured the imagination of a prior generation. The strategy has paid off handsomely, and Volkswagen is again the darling of young and young-thinking buyers, with sales approaching the record levels of the past. Maybe it will get the necessary momentum if, as many expect, it launches a new version of the legendary Microbus "hippie van." A decision is due by mid-year.
Hyundai is another success story. Like VW, it nearly abandoned the American market in the early 1990s as sales dried up. But since then, the Korean carmaker has reinvented its designs, significantly improved quality-and continued to emphasize its price advantage.
That raises the biggest challenge automakers face with Millennials. For these mostly first-time buyers, the bottom line is, well, the bottom line. The average car now costs about $22,000 and even economy models typically top $14,000. That's the primary reason, industry types admit, that far fewer Millennials are buying new cars today than the Baby Boomers did at roughly the same age.
Unless manufacturers can find a way to put a cap on prices, many of the products targeting Gen-Y will wind up selling youthful style and imagery to older consumers-like us age-challenged Boomers.
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About Paul Eisenstein
Paul A. Eisenstein has been covering the auto industry since 1979. One of the world’s most widely published automotive journalists, Paul’s work routinely appears in such publications as The Economist, Investor’s Business Daily, Germany’s Auto Motor und Sport, Popular Mechanics, Automotive Industries, Cigar Aficionado, the Cleveland Plain Dealer, and Nikkan Jidosha Shimbun, Japan’s automotive daily. He’s also a regular commentator on National Public Radio’s Morning Edition, and a frequent guest on a variety of other network broadcasts. Paul also serves as a member of the jury for the North American Car and Truck of the Year awards, and is a board member and past president of the Automotive Press Association. He has won a number of writing awards over the years, including a prestigious Wheels award, presented by The Detroit Press Club Foundation.
Born in Chicago and raised in New Jersey (exit 117, to be precise), he received an associate's degree from Brookdale Community College, and then, feeling an urge to see more snow, he moved to Ann Arbor, Michigan, graduating cum laude with a bachelor’s degree from the University of Michigan. Mr. Eisenstein currently resides in Pleasant Ridge, Michigan, the smallest incorporated city in the state, with his wife, Christine Anderson, three talkative black cats, and too many computers to count. |
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