Nearly 10% of households headed by a Gen Y consumer bought new cars or trucks last year, or roughly 700,000 units, says Walter McManus, an executive director at consultancy J.D. Power & Associates. He predicts vehicle sales to Gen Y household heads will rise to 3.5 million units by 2010, or 20% of total industry sales. By 2020, the group will account for 5 million new car and truck sales annually.
Every year, 400,000 more of those born between 1977 and 1994 will get their driver's license, says Jim Farley, VP-corporate manager of Toyota Motor Sales USA's Scion unit. Scion, the new Toyota Division sub-brand, is aimed at trendsetting members of Gen Y in their early 20s, mostly male.
Scion is Toyota's latest effort to reach the elusive Gen Y market. The marketer's entry-level Toyota Echo subcompact car, launched in 1999, wasn't a hit. Mr. McManus says Echo's styling didn't appeal to Gen Y, and styling is the top reason that age group picks a particular model. Toyota has lost share in sales to buyers 25 and younger, from 10% of its total sales in 1992 to 9% in 2002.
The first two Scion models go on sale this June in California, at Toyota dealerships, and it expands to other markets next year.
Gen Y'ers "want to discover their own products so our marketing strategy fits into that," Mr. Farley says. Half of Scion's launch budget will be in non-traditional media. Earlier this year, Toyota let young consumers discover Scion at California record stores. Scion tapped AMCI, an Omnicom Group auto consultancy, to give away test drives through the stores. More than 1,000 consumers participated. "That's what our marketing will be like," Mr. Farley says. Independent Attik, San Francisco, is handling creative and strategy.
American Honda Motor Co. late last year launched its Gen Y-aimed Honda Element, a boxy sport-utility vehicle. Ads from independent Rubin Postaer & Associates, Santa Monica, Calif., show the great outdoors as seen through the vehicle's rear door or wide-swing side doors.
"Honda has always done better [than others] with buyers under 25 so it doesn't need a whole new brand," says Mr. McManus. Honda's new-vehicle sales to people 25 and under were 12% of its total last year vs. 10% in 1992.
PONTIAC MILKS THE NICHE
General Motors Corp.'s Pontiac brand is also near the top with Gen Y; 10% of its 2002 sales were to these young people.
Mr. McManus, who compiled an extensive Gen Y study last fall, found the group rated South Korea's Kia Motors America as the most attractive vehicle brand, followed by Volkswagen of America, GM's Saturn, Hyundai Motor America and GM's Pontiac. "The impressions made on these new households by their first vehicles will stick with them for a lifetime," he says.
New-vehicle sales to drivers 25 and younger dropped from roughly 20% of the industry's annual sales in the 1970s and 1980s to 10% in the 1990s. In the past three years, it has bumped back to 12%, which Mr. McManus attributes to low-price South Korean imports.
"Prices drive a lot of the youth market," says Wally Anderson, VP-marketing at Kia. Nearly 16% of all Kia's buyers are from Gen Y, mainly due to its entry-level Rio and Spectra cars hitting the target. He says Kia's product mix, 10-year warranty and humorous advertising attract Gen Y. To date, the marketer hasn't used non-traditional marketing. Independent davidandgoliath, Los Angeles, handles.
Saturn opted for non-traditional marketing before launching its all-new Ion small car earlier this year, says Matt Armstrong, the car's marketing director. Saturn sponsored its first-ever music festival tour last summer to reach both Gen Y and X. A tent at the festival had an Ion driving videogame and merchandise giveaways.
"We wanted to take it to events [these age groups] were already at," Mr. Armstrong says. In addition to sponsorship-product placement deals with Viacom's CBS for "Survivor" and with "Cram," a show on Sony Pictures Entertainment's Game Show Network, Saturn is still backing the Ion with traditional TV commercials from Omnicom Group's Goodby, Silverstein & Partners, San Francisco.
Ford Motor Co. has used similar tactics for its Ford Focus small car line, which bowed in 1999. Ford is relaunching its carry-over Focus line this year and is expected to spend an estimated $50 million in measured media. The carmaker has dubbed Focus a success because 25% of its sales every year are to Gen Y.
Although the Ford brand was tops with Gen Y last year-accounting for 17% of all sales to the group, only 7% of the mass-market brand's total sales were to Gen Y, Mr. McManus reports. GM's Chevrolet has also slipped with Gen Y, he says.
Experts agree Chevy's entry-level Cavalier is overdue for a redo. Chevrolet is trying to get its groove back. It was the presenting sponsor last month of Primedia's third annual "Spring Break Tuner Bash" in Daytona Beach, Fla. The event featured Chevy's latest tricked-out vehicles, concerts and a Sony PlayStation 2 gaming exhibit.
When Gen Y'ers shop for a new vehicle, the majority rely on recommendations for data on make and model, Mr. McManus says, adding there was a surprise in his study: Gen Y uses the Internet less than Gen X for pricing information-only 25% vs. 32% for Gen X and 40% for baby boomers. He speculates Gen Y is relying more heavily on help from family and friends.