Detroit Makes Gains Against Imports With Youth Market

At long last, Detroit seems to be getting some respect. In the most recent results of an ongoing study, domestic and foreign brands are roughly neck and neck when it comes to how they’re seen by 18- to 30-year-old buyers. According to CNW Marketing Research of Bandon, Oregon, young buyers crucial to the U.S. auto industry’s future are starting to give domestic models the same consideration as imports, potentially signaling a broad-based shift in consumer preferences. Even customers with foggy memories of what it was like to be 30 are paying more attention to the Detroit Three as they shop for new vehicles, analysts say. 

Climbing Consideration

That’s a dramatic improvement for Detroit over a decade ago, and a reversal for foreign brands. The study measures “consideration," the first, crucial stage in buying a vehicle.  Too often, it has been the missing piece of the puzzle for the Detroit Three, say analysts.

Detroit saw a staggering loss of “consideration” from 1995-2005, according to the research firm. In 1995, only 19 percent of what it called “young intenders” would not consider buying a domestic vehicle. But that number climbed to 39 percent by 2000. The low point came in 2005, according to the research firm, when a full 41 percent of young car shoppers had ruled out buying a Ford, General Motors or Chrysler product. 

It’s no surprise then that Mercury vainly pursued “consideration” in its advertising -- “You’ve got to put Mercury on your list” -- as it tried to pull out of its nosedive over the last few years, one that eventually led to its demise this year.

But the percentages of buyers that would never consider a domestic brand began to decline as the past decade wore on, while the share of buyers that would never consider imports began to rise. The percentage of young buyers willing to consider either a domestic or an import brand has risen from 32 to 35 percent between 2005 and 2010. Given Detroit’s fall from grace during the 1990s, this can be viewed as a gain for the domestics.

Detroit Fights Back

The reversal of Detroit’s fortunes comes largely from improved quality and more exciting products, say analysts.

David Sargent, vice president of global vehicle research at J.D. Power & Associates, credits Ford and GM’s recent wave of new products, along with their newfound enthusiasm for the imports’ traditional turf, the midsize and compact segments. Vehicles like the Ford Fusion, the Chevy Malibu and Equinox, and the Cadillac SRX have helped make the difference, he said.

"A large part is that the Detroit Three are coming out with cars that are more appealing to consumers than they were previously," he said. “They are increasingly competitive in midsized vehicles, and we are likely to start seeing that happen with small vehicles like the new Ford Fiesta.”

Analysts agree that vehicle quality – or at least the perception of it – drives consumer consideration. But quality doesn’t simply mean reliability. Consumers also pay attention to quality in design, performance and technology. "It's always the sheet metal at the auto shows," said George Pipas, sales analyst at Ford. "But consumers are extremely value conscious. That doesn't mean a low price. It means they consider the total value equation for product because it is such a big ticket item."

Still, it has been an uphill battle for Detroit. Perceptions lagged even as its quality edged upward, Sargent said. “They take a long time to change, particularly when they are negative.”

In some cases, models advanced in the quality rankings without creating much of a stir. No one really notices when a car model rises from 25th to 22nd in the rankings, for example. “But when you move from eighth to fifth, suddenly people get very excited,” Sargent said.

The same was true for fuel efficiency. The most fuel-efficient cars from Detroit have gone head-to-head against their counterparts from Toyota and other Japanese brand for several years, with highway miles per gallon usually in the low thirties for midsized cars and low- to mid-thirties for compacts. But imports enjoyed a reputation for greater fuel efficiency, at least until now. Since gas prices soared in 2008, automakers are more likely to advertise fuel economy, and customers are more likely to pay attention to it, analysts say.?
Pipas argues that Ford vehicles’ quality ratings and fuel economy are part and parcel of their appeal. “There's no question that this message is getting out,” he said. “Most consumers look at fuel efficiency as a proxy for quality. If it's fuel-efficient, then that means that care has been taken throughout the design and the engineering of the vehicle.”

Blame The Boomers

There are other explanations for the change, as well. One is a generational shift in the market, said Sean McAlinden, chief economics and vice president for research at the Center for Automotive Research in Ann Arbor, Michigan. Many baby boomers had given up on Detroit’s vehicles, but now, McAlinden says, the post-baby boom generations are giving U.S. manufacturers a fresh start.

“It was the baby boomers who were most loyal to Japanese makes and made the big switch from Detroit,” he said. “They are beginning to fade now in the market and have been labeled by Detroit executives as the ‘lost generation.’ Many Detroit execs felt they could never make a comeback with that generation and their memories of bad Detroit quality, and that they could only make a comeback with entirely new generations of buyers.”

Not Just Toyota

If you’re thinking that Toyota’s recent misfortunes is the root cause of this, understand that the trend can be traced back at least five years, long before Toyota's recall debacle. Analysts agree that Toyota gave the Detroit Three a boost earlier this year, but it should not be overstated. "People have started to move away from Toyota a little, but that may be a short-term phenomenon," Sargent said. “Consumers are still giving the quality edge to Japanese automakers,” he said.

So Detroit still has a fight on its hands, as do the import brands. And consumers are likely to emerge as the real winners.