new kids on the lot

American Demographics, Jan, 2000 by Nancy Shepherdson

Gen Y's are growing up. Believe it or not, 27 million are already old enough to drive. Automakers, meet your customers of the future.

They're young. They love cars. And there are a lot of them - about 70 million - a cohort nearly as big as the baby boom. But Generation Y doesn't think or act much like boomer consumers. They've already driven pop culture icons like Nike and Levi's to distraction with their fickle interest in alpha brands. Immune to tried-and-true brand strategies, they'll decide what's cool, thank you very much, and for reasons only vaguely grasped by their elders. All of which makes Gen Y both a tempting target and a formidable challenge for automakers worldwide.

Winning young hearts and sales may be even more of a challenge than many car marketers realize, if the purchase decisions of a group of Gen Y car buyers are any indication. More than 1,200 new-car acquirers between the ages of 16 and 22 were part of a survey of people who bought 1999 vehicles between September and November 1998, conducted by AutoPacific Inc., an automotive market research company with offices in Detroit and Los Angeles. What these young consumers told researchers, according to an exclusive analysis for American Demographics, is an early indication that the industry may be in for a bumpy ride.

For one thing, despite being putatively the most cyber-hip generation in history, these car buyers prefer to get their information about new cars from friends and relatives, and then confirm (or stomp on) those impressions with test drives. Despite the millions being sunk into automaker and other car-related Web sites, the Internet doesn't even rank in the top ten as a source of information for these Gen Ys. "Word of mouth will be the `viral' method of marketing in coming years, infecting someone with your enthusiasm," says J. Walker Smith, president of Yankelovich Partners Inc., a generational-marketing specialist based in Norwalk, Connecticut. The problem is figuring out how to get in on the conversation.

It helps to know who these kids are. Born between 1977 and 1994, the first Gen Y drivers got their licenses seven years ago. Now, despite the fact that auto companies just recently started noticing them, there are already about 27 million Ys out there old enough to hit the road, according to U.S. Census Bureau estimates.

Although they were between 16 and 22 years old when they were surveyed, only 21.9 percent of the AutoPacific respondents said they were students, either in high school or college. The rest are probably already in the workforce trying, among other things, to better afford new cars. The most common job categories are service, sales, administrative/clerical, and technical - jobs that don't necessarily call for a college degree.

In general, they seem to lead relatively quiet lives, not the revved up party-a-go-go that ads aimed at them would lead us to believe. A majority of them sa id they regularly spend time listening to music, hanging with friends, going to movies, dining out, and watching TV. Almost all of them shy away from political activity, tennis and, surprisingly, motorcycling.

What's even more surprising, at least to automakers planning to sell cars over the Internet, is that only 35.9 percent of those surveyed by AutoPacific say they regularly use a home computer. Part of the reason could be attributed to the racial and ethnic make-up of the group. Minorities, also less likely to own computers, make up a larger proportion of Gen Y, according to the Census Bureau - 34 percent, versus 27 percent of the total population. And the lack of college degrees - again, a strong indicator of computer use - may also be a factor.

About half of those surveyed by AutoPacific live at home with their parents, which may make buying a car a bit easier. Those who are driving new cars may have purchased them on their own or they may have benefitted from the largess of mom and dad.

But even that largess hasn't been very large: the average purchase price of a Gen-Y ride was significantly below that of the average for buyers of all ages in the survey: $21,116 versus $25,122. "Gen Yers appear to be `sentenced' to their vehicles," says Brad Fox, an AutoPacific analyst. "That is, they end up in a certain type of vehicle, not necessarily because they want to, but likely because of their financial position." The top category choices among these buyers, at 40 percent, were high-end small cars (like Dodge Neon and Ford Focus), among the cheaper cars on the market, but certainly not the cheapest. Indeed, of the top-five purchase reasons given by Gen-Y buyers, four were money-related (value for money, sticker price, warranty, insurance rates). The number one reason for selecting a car, though, was overall quality.

Jennifer Schardt, 20, a telephone representative and full-time student who lives (with four roommates) in East Lansing, Michigan, had to give up her dream vehicle after a dose of reality at the auto dealership. "I wanted a Jeep, but the payments were too high for a person my age," she says. Schardt eventually settled for a Pontiac Sunfire. She has to pay 17 percent interest on her loan (for people with no credit), but at least she got the sunroof, stick shift, and sporty look she wanted.