News Column

Wandering Eyes

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Across the country motorists are beginning to re-think their auto-buying and -driving habits, especially now that the cost of gas is a major consideration. That includes members of the fast-growing and increasingly affluent U.S. Hispanic community, industry experts note. They point out that American manufacturers can no longer take for granted this group long seen as one of their most loyal buyer segments.

That's particularly bad news for Detroit automakers. They traditionally dominated the Hispanic market, but some critics contend the Big Three (Chrysler, Ford, and GM) also assumed they would hold a major share of this segment. As import brands become more popular among Hispanic auto buyers, that assumption is proving to be a dangerous one.

Domestic Brands Look for Traction

Consider what the Census Bureau labels some of the nation's fastest-growing states California, Florida, Texas, Arizona, and North Carolina. Collectively, Detroit's share of those five states fell to just 46.9 percent in 2004, down more than eight points since 1999, according to research by R.L. Polk.

With Asian import brands like Toyota, Honda, and Nissan dominating the mainstream market, and luxury makes such as Lexus overwhelming Detroit's Cadillac and Lincoln in cities like Miami and Los Angeles, the Big Three are struggling to keep their collective nationwide market share from plunging below the watershed 50 percent mark for the first time.

In terms of specific brands, R.L. Polk data on share of the U.S. Hispanic market revealed that:
n Ford was the dominant nameplate within the community but from just 2002 to 2004, its share slipped from 21.1 percent to 18.8 percent; and as of June 2005 it held first place with Hispanics by a hair, with a 15.9 percent market share.

n Chevrolet, once the market leader, actually bucked the Big Three's downward trend, gaining just under a point of share. At 15.9 percent of the Hispanic market for 2004 and 15.8 percent as of June 2005, it's right on Ford's bumper but still a shadow of its once-powerful self.

n Perhaps the most revealing signal shows up with the shift in the number 3 slot. In 2004, Toyota nudged past Dodge. While Dodge's share was relatively flat between 2002 and 2004, Toyota's soared from 8.8 percent to 11.5 percent, and sustained the lead at 11.0 percent in the first half of 2005 compared with Dodge's 7.2 percent.
n Meanwhile, value-priced Hyundai first burst onto the list in 2004, and was number 9 to Kia's 10th place at mid-year 2005.

A recent report published by the American International Automobile Dealers Association (AIADA) found that Toyota is actually number 1 among Hispanics in the Los Angeles market, with Nissan at number 2. The Japanese giant is also the community's top choice in California overall, as well as in New York and Florida, AIADA indicated.

It's no wonder then that the traditional domestic manufacturers have been shifting resources from conventional marketing efforts into the Hispanic community. "We have to do better in these key markets," concedes Mark LaNeve, General Motors North America's vice-president of sales, service, and marketing. "Hispanic communities are growing everywhere in the country, so if we want to grow, we have to connect with the Hispanic market."

General Motors actually has shown some success in regaining its once-dominant position within the Hispanic community. Its "Subete" (which GM translates as "join in") ad campaign has resonated with Hispanic buyers, as have a variety of support efforts. GM's finance subsidiary, for example, has set up meetings at Hispanic workplaces, explaining the nuances of car loans and providing potential buyers with easy applications and quick decisions.

If Detroit's share has been tumbling fast, the process of rebuilding will take time, according to Sonia Maria Green, the Miami-based director of Hispanic diversity marketing and sales for General Motors.

In a profile in Hispanic Business ("Market Driver," April 2005), Ms. Green noted that "this culture is driven by relationships. Take time to establish relationships and you will reap the benefits."

There are plenty of benefits to reap, according to the latest data. The Hispanic share of the U.S. motor vehicle market is on a fast rise. In 2000, the community purchased 5.3 percent of all new cars and 6.5 percent of new trucks. Just three years later, that rose to 7.1 percent for both cars and trucks.

In dollar terms, Hispanic spending on trucks soared from $4.9 billion to $9.1 billion over that four-year period. And spending jumped from $5.3 billion to $7.8 billion for passenger cars. These numbers, incidentally, reflect the fact that Hispanic motorists are not just buying more cars they're buying more expensive ones.

Also, Hispanics are collectively more sensitive to the nation's economic ups-and-downs, so market share numbers show unusually wide swings. In 2001, Hispanics bought a record 9.6 percent of all light trucks, but the trend to pricier purchases is considered unavoidable.

Casting Nets on the Web

While the Hispanic community has its obviously unique characteristics, many Hispanic buying trends resemble those of the broader market, such as use of the Internet to find information during the auto purchase process. Studies by the likes of California market-research firm J.D. Power & Associates indicate more than three out of four U.S. auto buyers do this, and that's echoed by data from comScore Media Metrix. And with 14 million wired Hispanics increasing at 10 percent a year, according to Forrester Research sites such as Yahoo! Autos and Edmunds.com registered solid double- and even triple-digit increases in Hispanic traffic during the 12 months ending in July 2005.

Web Coverage Correlates with Gains

Among auto-related sites, Volkswagen showed the second-largest gain in Hispanic traffic, according to comScore Media Metrix. And not by accident: Early in 2005, the German automaker launched a targeted Spanish-language site with the Web address Agarracalle.com. That's the translation of the company's successful and long-running English-language ad slogan, "Driver's Wanted." Agaracalle boasts a variety of tailored features, from animated images of each VW model to an automated dealer locator.

Volkswagen isn't the only maker targeting Hispanics, of course. There's been an explosion of independent Spanish-language auto sites, including versions of the huge buying service, Autobytel.com, as well as
ElCarroConexion.com, published by
TheCarConnection.com (which, in full disclosure, is published by this story's author).

Not all the maker sites are hard sell. Ford's Mi Negocio (www.ford.com/go/minegocio) emphasizes community outreach. But there are, of course, plenty of links back to Ford's main car sites. "We're very committed to this market," explains David Rodriguez, multicultural marketing manager at the automaker's flagship Ford Division. "We have been doing Hispanic marketing since the 1970s and we're proud of what we've accomplished. We truly believe in going way beyond ads and sponsoring festivals, and [are] looking at this with a 360-degree approach."

Ad Budgets, Strategies Shifting

There's been an across-the-board shift in automotive marketing in recent years. Consider the situation at the Chrysler arm of DaimlerChrysler AG. Since the beginning of the decade, network, cable, and other TV spending has dropped from 75 percent of the total Chrysler budget to just 55 percent and "is declining another 3 to 5 percent a year," according to the DaimlerChrysler unit's senior vice-president of global marketing, George Murphy.

While Mr. Murphy stresses that "TV is not going away," resources are being diverted to radio, print, billboards, and especially to Internet and "event marketing."

Chrysler is not alone. Toyota's youthful Scion brand all but eliminated TV from its marketing strategy, putting prime emphasis on events, such as sponsored parties at some of the country's hottest nightclubs. Scion found this strategy especially effective in reaching youthful ethnic groups, including Hispanics. Other automakers are following this lead which should be no surprise, as it reflects the underlying social nature and structure of the Hispanic community, suggests Martin Walsh, executive director of sales and marketing at GM.

According to Mr. Walsh, there are many subtle differences in the Hispanic community that can easily be lost in a casual marketing effort, and attention to those differences will affect everything from the products a manufacturer promotes to the way it writes a loan. Hispanic buyers, GM research suggests, tend to be particularly driven by style, price, and that more nebulous concept, "accommodations." "That's a reflection of Spanish culture... which is [more likely] to have extended families living at home," explains Mr. Walsh. "We need to provide comfort not just for the driver, but for the extended family."

That carries through to the financial side, manufacturers have discovered, where it is common for an entire family to chip in for the purchase of a car.

Smart lenders, such as General Motors Acceptance Corporation (GMAC), have revised their practices to account for that fact when determining a Hispanic borrower's resources. This ability to pool assets is one reason the community's car-buying numbers are growing so rapidly, Mr. Walsh adds. Immigrants are often acquiring the means to buy a new auto or truck "if not in the first generation then the second," he says. "Compare that with past generations of European immigrants, where the ability to acquire a new car or home might have taken three or four generations."

Industry marketers have also had to learn a lot about the assimilation process. On the one hand, "Hispanics are 81 percent more likely to purchase" a vehicle, says Mr. Rodriguez at Ford, if [the company has] ads in Spanish." But on the other hand, experts caution carmakers to recognize that as with immigrant Germans, Italians, Jews, and other groups subsequent generations of a family are more and more likely to want to communicate in English.

Even in using Spanish, savvy marketers recognize the need to gear regional messages to local tastes and tongues. "We need to be cognizant of that," explains GM's Mr. Walsh, "in how we construct" everything from the message to the music, as well as the accent of an ad's narrator.

At the turn of the new millennium, the U.S. Census revealed there were 35.3 million Hispanics living in the United States. "Since then, growth has continued at a brisk pace," finds a report from the Pew Hispanic Center. While the overall U.S. population increased another 2 percent by 2004, the Hispanic community grew about 14 percent, bringing the total population to an estimated 40.4 million.

Achieving the American Dream

And all signs suggest that, when adjusted for economic cycles, the community's share of the car-buying population will swell steadily and move up-market. "Hispanics are here to live the American dream," says Jessica Potts, manager of public and industry affairs for AIADA. According to the trade group's July 2005 report, 72 percent of Hispanic luxury car owners have a household income under $75,000, and 66 percent are under the age
of 45.

The real question for automakers is, "Who will dominate this market?" For decades, Detroit's grip seemed unflinching. But in recent years imports, especially from Japan, have increasingly gained in appeal. Manufacturers that don't attend to the community's unique needs and desires will lose the sales.
Consider Los Angeles high school teacher Charlie Lopez. When the numbers on the corner gas pump started spinning like a slot machine, Mr. Lopez decided it was time for a change. He had long been a loyal Ford fan, but "I realized I was never going off-road in my Explorer," he says, "so why did I want to spend all that money on gas?"

Only a little reluctantly, he decided to trade his SUV in for a new Toyota Prius. At the time, it took the dealer nearly four months to deliver the wildly popular hybrid-electric vehicle to Mr. Lopez, who admits it's taken some time to get used to driving the compact sedan. But now that he can use it to drive in the carpool lanes all by himself, he feels the decision was clearly right for his needs.
He is by no means unique.

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