Gen Y: Myth vs. Reality

At the annual North American International Auto Show (NAIAS), vehicle manufacturers flaunt trendy concept vehicles with the latest gadgetry and colors fresh from Paris, Milan and New York.

At the annual North American International Auto Show (NAIAS), vehicle manufacturers flaunt trendy concept vehicles with the latest gadgetry and colors fresh from Paris, Milan and New York. In theory, the clamoring throngs of consumers often encourage carmakers to convert concept vehicles into production versions. What’s missing in these visions of the future? Often, practicality and common sense.


Honda Model X: Gen Y’s Vehicle?

At the 2001 NAIAS, Honda unveiled its Model X concept, custom designed for young male buyers. Amid fanfare and “target buyers” riding skateboards on a half-pipe in the background, Honda touted the Model X as having “real production potential.” With such “cool” features as a flip-up navigation system, wireless Internet capability, on-board video games and high-end stereo system. And it has since announced production will commence.

The Honda Model X targets college-age males, especially those with outdoor- and activity-centered lifestyles Honda expects the Model X to occupy the new Activity segment of the auto industry between sport-utilities and minivans. Think Pontiac Aztek but “cooler.” Good idea, wrong demo-graphic group.

What’s wrong with this picture? Reality, for one. Most young active male vehicle purchasers (18-25) can’t afford the $15,000-20,000 target price for the Model X, let alone the pricey add-on electronic features. Most male buyers in this demographic group are more apt to purchase a five- to 10-year-old sport utility or light-truck. These buyers often turn to the aftermarket for “add-on‘s” like new wheels, audio systems, interior trim accents, and exterior lighting augments.


Insurance Cost Barriers

According to research conducted by Providata Automotive, the number-one concern of young male buyers is vehicle insurance costs. New sports cars, sport-utilities and activity vehicles are out of the reach of most young male buyers despite their appeal to this demographic group. Economic factors like insurance costs, fuel economy and long-term vehicle maintenance are even more obvious to Gen Y male buyers. Used cars/trucks are the vehicle of choice among younger buyers.


Credit Approvals: Co-Signers Apply Here

Purchasing a new vehicle through the usual OEM-owned finance companies could often be next to impossible for first-time young buyers without sponsorship from a credit-worthy co-signer. Less than 30% of college-aged students have this option available to them, especially with most parents footing the bill for college tuition, room & board, and incidentals. This task is impossible with college-aged students that foot the entire college bill themselves.

Today’s young male target buyer is burdened by high debt loads, student loans and relatively low income levels. To purchase a vehicle in this category, a young consumer would have to demonstrate at least $35,000 to $40,000 in annual income with near-perfect credit. Most 18- to 25-year-old males don’t fit this categorization.


Practical Features for Young Buyers

One of the highest-scoring items for vehicles among younger buyers is engine type/size. A six- or eight-cylinder engine (despite its fuel economy disadvantages) is a feature that young buyers need and appreciate. (The aforementioned Honda Model X comes equipped with a four-cylinder engine.)

Another key issue is a vehicle’s hauling capacity in terms of cargo and hitch accessories (like jet-skis, snowmobiles, dirt bikes and U-Haul trailers). Between the ages of 18 and 25, the average male conducts 7 to 8 moves personally, with another 5 to 8 moves for friends and family members. Vehicles without ample cargo space or towing capabilities limit their usefulness to consumers in this group.


Missed Targets, Revisited

As demonstrated, the real market for the Honda Model X should be slightly older, active, post-college male buyers (25 to 34). Equipped with new college diplomas, new jobs and thousands of dollars in student loans, Model X fits their active lifestyles and pocketbooks.

Vehicle manufacturers often misfire when matching vehicles with demographic groups. Another example is the introductions of Lincoln Navigator and Cadillac Escalade. Both vehicles were originally targeted for the “soccer mom” set looking to upgrade from minivans into high-scale luxury sport-utilities. So where did the Escalade and Navigator find a home? Urban consumers disappointed at the disappearance of the stretch Chevrolet Impala (Caprice clone before its recent restyling), shrinking Cadillac models and lack of upscale sport-utilities constitute a large share of luxury sport-utility vehicle purchasers.

Realizing their mistakes, Cadillac and Lincoln are busily retooling their advertising campaigns promotional materials and vehicle features to cater to the affluent urban buyers. Missed targets can often turn into bull’s eyes in other categories.