News Column

Hispanics Grabbing the Keys

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Hispanics are buying more new cars and trucks than ever before, scooping them up at a faster pace than the overall market.

In 2005, Hispanic households spent nearly $22 billion on new vehicles, up from the $9 billion they spent in 1994, according to the recently released "Consumer Expenditure Survey, 2005," from the U.S. Department of Labor's Bureau of Labor Statistics.

The survey also found that Hispanic spending on new vehicles increased at an annual rate of 9.2 percent, while the overall national rate grew by an anemic 1.9 percent – below the rate of inflation during that same period.

And it doesn't look like Hispanics will put the brakes on new vehicle purchases anytime soon, especially since the Hispanic buyer is in general younger than the average purchaser is. New cars and truck sales to Hispanics are projected to grow 29 percent by 2010, according to J.D. Power & Associates. Hispanic consumers are expected to spend $40 billion a year on motor vehicles and parts by the end of this decade.

So who is this Hispanic car buyer? Despite major automotive manufacturers' growing interest in the Hispanic consumer, research on whom is buying what is still scarce.

One thing is certain: The Hispanic consumer cannot be lumped into one category. They are as varied as the new car models rolling off the production lines, from the upwardly mobile and educated single man or woman to recent arrivals with large families. They are as likely to buy a Range Rover as they are a Chevy Silverado, and are as likely to do their research on the Internet to find a car dealership as the print media.

Plus, Hispanics are getting wealthier. The last decade has seen a 126 percent increase in U.S. Hispanic households making more than $100,000 per year, which represents a total net worth of $500 billion.

"With the Hispanic median age being so much lower than the general market's, the Latino influence will only continue to grow," says Carlos Martinez, vice-president and general manager at Conill Advertising, where he is in charge of marketing for Toyota brands to the Hispanic market. "I can't say down the road that manufacturers will be designing cars for Hispanics, but I think if you are making cars for the U.S., you will have to take the Hispanic into consideration."

This consumer is buying newer and more expensive cars, increasingly choosing imports over domestics. While some reports show Toyota as being the current top brand of choice for new vehicles purchased by Hispanics, others point to Ford or General Motors and its Chevrolet brand.

How Hispanics approach car buying is also evolving.

"They're more educated and so that brings a level of empowerment to the Hispanic consumer, so what you have is a much more informed buyer walking into our stores," says David Rodriguez, the multicultural marketing manager for Ford Motor Co.

Hispanics are also very comfortable spending money on new luxury vehicles, even more so than non-Hispanics at the same income level.

They're also buying luxury automobiles at a faster rate than the overall market. Vehicle registrations for luxury vehicles increased 53 percent from 2002 through 2006, while non-Hispanic registrations only rose 13 percent during that same time period, according to R.L. Polk & Co. figures that were provided by Conill.

Luxury carmakers are paying attention. This year, Ford's Land Rover unit rolled out marketing campaigns that included advertising in Hispanic publications and Web sites, and event sponsorships in cities such as Miami and Los Angeles.

"Land Rover values the affluent Hispanic consumer target, because he embodies many of the values that define our brand authenticity, worldliness, determination and a spirit of adventure," says Alexandre Acey, national communications manager for Land Rover North America.

In 2006, Toyota's Lexus brand stepped up efforts to target well to do Hispanics by launching its first ever web site in Spanish. Starting this month, Lexus will sponsor Miami's Casa Décor 2007, a six-week event featuring the country's leading interior designer.

"Latinos making $50,000 plus are definitely in the market for luxury cars," says Andrew Speyer, vice-president of account planning at Zubi Advertising, a Miami-based advertising agency in charge of marketing Ford's Lincoln Navigator and F-150 brands to Hispanics. "We noticed that with the Lincoln Navigator's success.

"That's the interesting part of this whole story – our clients make certain assumptions of people's ability to spend based on the way that looks in the general market, but for Hispanics it's different."

For example, many younger Hispanics tend to live at home longer and, in turn, have more disposable income than their general market counterparts.

"We all over-estimated what the minimum income requirement would be for people who would buy the [Lincoln Navigator]," Mr. Speyer says. "What we found was that people we thought couldn't afford this car could afford it. The 28-year-old guy who stills lives at home could probably afford the Navigator."

Meanwhile, the Hispanic car shopper of today is also doing more of their auto research online.

According to the 2006 AOL Latino Hispanic Cyberstudy, online Hispanic households were four times more likely to buy a new car via the Internet than the general online population.

The study also found that Hispanics are also more likely to locate a dealership online.

Forty-five percent of Hispanics said they researched their car dealer through the Internet, compared to only 25 percent of non-Hispanic car buyers.

When it comes to what features Hispanics look for in their cars and trucks, style and design is at the top of their shopping lists. Hispanics want their new cars and trucks to stand out and they don't mind spending extra for added features like a state-of-the-art sound system or high performance tires.

"Hispanics like a loaded vehicle, style is very important to them," says Mike Shaw, chief executive of Mike Shaw Automotive, a Denver, Colorado-based dealership that ranks No. 21 on the Hispanic Business 500. "That's higher on the list than the general consumer."

This applies to their trucks, too, Mr. Shaw says.

"A lot of them use their truck for work, but when they go home Friday night they clean it up and use it as their personal vehicle, too," he said. "They take a lot of pride in their vehicles."

That hasn't gone unnoticed at Ford, whose F-150 pickup ranks as one of the top sellers among Hispanics.

"What we've seen in terms of the prioritization of vehicle attributes is the notion of design and styling being more of a higher criteria compared to the total automotive audience," Mr. Rodriguez says. "Also certain parts of the Hispanic market have a tremendous interest in customizing."

Customizing cars and trucks is more popular among the younger Hispanic consumer, say industry observers, and that car buyer happens to be younger than other ethnic groups.

A recent survey by Torrance, California-based market research firm AutoPacific Group found that Hispanic and Asian new car buyers are among the youngest of all ethnic groups.

"They are substantially younger than in the other markets," says George Peterson, director of the AutoPacific Group.

The study also found that Hispanics pay around $27,000 for new vehicles, compared to $28,000 for the overall market. Price and monthly payments are their top criteria when purchasing a new car.

The AutoPacific Study, which surveyed 24,758 new motor vehicle registrants in 2006, also found that 47 percent of the Hispanic new car buyers were college educated.

"This is a very young and educated group of people," Mr. Peterson says. "They're the ones buying new cars as opposed to buying cars in general. They're younger, more educated, and relatively more affluent than they were 20 years ago. That's why all the major car manufacturers have major ad campaigns."

The top carmakers are among the country's biggest spenders on Hispanic advertising. At $102 million, General Motors spent the most on Hispanic media among automotive advertisers, Ford came in second at 85.7 million and Toyota was third at 81.8 million for the period of July 2006 to June 2007, according to Nielsen Media Research.

The decade ahead, say industry observers, will be a close race for market dominance among car manufacturers.

Toyota, which has been reaching out to the U.S. Hispanic consumer for 20 years, has recently focused its marketing efforts on its Toyota Tundra pickups, specifically targeting the Mexican consumer by sponsoring charreadas [Mexican rodeos]. Earlier this year, Toyota rolled out a Spanish-Language campaign for its Highlander SUV targeting affluent Hispanics.

General Motors, whose Chevrolet brand and the Silverado are top picks for Hispanics, is currently pushing its cars and trucks by focusing on the Spanish music lover. The automaker is one of the sponsors for the 2007 Latin Grammys. And Ford is positioning its F-150 as a brand for the Hispanic who "lives in two worlds."

"We designed a spot for the F-150 Ford that we designed to reflect the sort of dichotomy of people who live in two worlds," Mr. Speyer says. "The dichotomy that a Latino man faces – that the culture he grew up in and the one he lives in are different and the expectations are different."

Mr. Rodriguez adds: "It's very much trying to capture the spirit of that and respecting the traditional values of this audience. The ad performed very well. The proof is obviously in what kind of market share we've been able to accomplish."

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