View Consumer Expenditures Survey Charts for Hispanic Spending
Until recently, the homogenized, mass-market mind-set of automakers, both import and domestic, seemed unable to grasp the breadth, depth, and affluence of the Hispanic car market. As a result, Hispanics were a target audience the industry all but ignored. But competition has a way of changing things.
Just standing on a street corner, anyone can see how the U.S. automotive market has fragmented in recent years. Gone are the days when a few vehicles, such as the Chevrolet Impala or Ford Taurus, could dominate sales. Today’s sales charts show a maze of niches and specialty vehicles. In response to all this clutter, carmakers are re-examining the notion of individual buyer segments. Few such categories stand out with the clarity – and buying power – of the Hispanic market.
Growth of the Hispanic segment shows in a number of statistics. The Labor Department’s Consumer Expenditures Survey finds that Hispanic spending on new cars and trucks surged from $868 million to $1.35 billion during the five-year period from 1994 to 1999 (see chart - "Hispanic New Car & Truck Purchases"). Over the same time frame, spending on used vehicles increased more than 50 percent, to nearly $2 billion (see chart - "Hispanic Used Car & Truck Purchases"). Add in spending on such items as financing, fuel, maintenance, and insurance, and the Hispanic market’s total vehicle expenditures came to a hefty $8.3 billion at the beginning of the new millennium – a figure the auto industry can no longer ignore (see chart - "Hispanic Total Vehicle Expenditures").
A closer look at the segment reveals further fragmentation. This is a diverse group, taking in young, Spanish-speaking immigrants in California, long-established families in Texas, and wealthy expatriates in Miami. So buying patterns reflect subtle differences within those particular regions, explains Roy Larson, president of Oregon-based Larson Northwest Research and Consulting, in Portland. The market also contends with a variety of other factors, such as age and acculturation, Mr. Larson notes.
Still, certain patterns distinguish Hispanic buyers from the broader U.S. market. For example, Hispanics tend on the whole to focus more on traditional passenger cars – sedans, coupes, and wagons – though that is shifting, as it is for the country as a whole, to minivans, SUVs, and light trucks.
The sales process also reflects differences, suggests Robert Santiago, account director at the advertising shop La Agencia de Orcí & Asociados in Los Angeles. Where the average U.S. car-buyer tends to focus on the driver and the driver’s needs, Hispanics tend to focus on "the needs of the family … the comfort and safety of their families in the vehicles," Mr. Santiago says. "Flexibility is very big."
Hispanic-oriented marketing, Mr. Santiago and other experts agree, tends to speak to this interest. As for sales and service, Hispanic buyers "want to be treated well, promptly, and effectively," says Jeff Campana, vice-president of California-based Allison-Fisher International, an automotive market research firm.
Automakers are locked in an intense battle for the loyalty of these buyers. Research confirms that Hispanics have traditionally been quite brand loyal; in the car market they have favored domestic brands such as Ford and Chevrolet. But that’s shifting, according to Mr. Campana.
"It’s changed in the last 10 years," he says. "The switch from domestic brands to Toyota and Honda is a reflection of the perception of value [among] Hispanic buyers."
Mr. Santiago echoes that sentiment. "If a Hispanic family buys [a Honda] Accord," he comments, "it’s a sign saying 'I have arrived.' However, in the truck segment, Ford still seems to dominate."
Data from Doublebase MediaMark Research documents a preference for imports over domestics (see table - "Brands Purchased"). Also, South Korean brands are making distinct inroads, especially among youthful Hispanics who place a high priority on price, although some uncertainty remains about the quality and long-term value of marquees like Hyundai and Kia. Young buyers are the least likely to be brand loyal, the research indicates. That’s especially significant, Mr. Larson emphasizes, because in the West Coast region, 75 percent of the Hispanic population is 35 or younger. For dealers, marketers, and manufacturers, that presents a great opportunity to make a first – and potentially lasting – impression.
Upscale Hispanics tend to reflect trends of the overall U.S. automotive marketplace. This year’s survey of Hispanic Business 500® CEOs found that the European brands, particularly German cars, clearly function as status symbols. In the survey, 23 percent of respondents are Mercedes-Benz owners, while another 9 percent drive BMWs (see article: "For the Renaissance Driver"). Lexus accounts for another 14 percent of respondents’ vehicles. Among domestics, Ford ties the Lexus in second place at 14 percent, while Cadillac measures up against BMW at 9 percent. When CEOs were asked to name their dream cars, the top brands were Aston Martin, Lexus, and Mercedes-Benz.
Considering the clout and car-consciousness of the Hispanic market, it comes as no surprise that automakers are stepping up efforts to reach Hispanics. Between 2000 and 2001, Ford increased its Hispanic marketing budget by 263 percent, General Motors by 82 percent, and Hyundai by 160 percent, according to the Hispanic Business Top 60 Advertisers directory (December 2001). Chrysler recently shot five Spanish-language TV commercials for products including the Neon sedan and Ram pickup. The automaker has increased its ethnic advertising budget to $210 million, though that covers other groups besides Hispanics.
On the dealer front, January 2002 marked the founding of The National Hispanic Automobile Dealers Association. The powerful National Automobile Dealers Association plans to pay more attention to Hispanics (see "Opposition to Auto Group Grows," Market Watch, May 2002). Ford Motor Hispanic Dealers Alliance hopes to help Hispanic entrepreneurs acquire more of the company’s outlets.
Automotive executives can no longer ignore the buying power of Hispanic motorists. Manufacturers and retailers alike are scrambling to get their brand messages to the right segment of the Hispanic market. The potential stakes are huge, and there’s no guarantee who’ll win – except the Hispanic consumer.
Paul Eisenstein is editorial director and publisher of www.thecarconnection.com.
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