Automakers look to tap youth market

Hyundai and Kia appeal to cash-strapped young buyers.

By Jonathan Berr Sep 27, 2012 12:39PM
 A young man buying a new car, copyright i love images, Cultura, Getty ImagesAuto sales to drivers ages 18 to 34 are rising after years of decline, according to USA Today.  

The companies that seem to be benefiting most from the trend are South Korea's Hyundai and its affiliate Kia, which excel at producing high-quality cars at reasonable prices -- at the expense of the Big Three and their rivals in Europe.

Though young people -- those not named Justin Bieber, at least -- usually don't have the disposable income or credit history to buy the vehicle of their dreams, that's less of a concern for makers of economy cars. 

In theory, the brand loyalties of young consumers can be molded more easily than those of older ones, who are thought to be already set in their ways. Marketers hope today's Hyundai Accent buyer (MSRP $14,545) will someday be more apt to plunk down nearly $60,000 for a Hyundai Equus. Automakers offer discounts to new college graduates not to be nice but to lure those young buyers. Given the improvements in the economy, the deals might get even sweeter.  

For one thing, consumer confidence recently rose to a seven-month high. Credit is easier to get now, though banks may never turn on the money spigot to the same levels they did before the Great Recession. While unemployment remains high, there are some signs of very slight improvements. The housing market is also showing some life.   

What may give Hyundai and Kia an edge over their rivals among younger buyers is that their cars are perceived to be good values. Hyundai offers a 10-year, 100,000-mile limited powertrain warranty, which it describes immodestly as America's best. Extras like that probably appeal to younger consumers. Hyundai's move last year to guarantee the future trade-in value of its premium models doesn't hurt either.

General Motors (GM), Ford (F) and Chrysler, and overseas rivals such as Volkswagen, have their work cut out for them in cracking this growing market. For instance, many young people don't have much disposable income. Many have to live with their parents for longer than they would have liked because they can't afford housing. Unemployment among recent college graduates is about 9.4%, which is still above the national average, though it is improving. The rate among high school graduates is much worse -- 31.1% -- although better than it has been, according to the Economic Policy Institute.

Nonetheless, if the trends outlined by USA Today continue, young buyers will give the economy a nudge in the right direction, which in these uncertain times is about the best one can expect.

Jonathan Berr may not wait for the wheels of his Honda to fall off before buying a new or nearly new vehicle. He does not own shares of the listed stocks. Follow him on Twitter@jbdberr.

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