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Dan Frost, 55, owner of Southfield Chrysler Jeep, says buyers of the Chrysler 300 are trading in more foreign cars, including Toyotas and Lexus vehicles. "We very seldom ever see those trade-ins," he says.Import drivers: Would you buy one of these?
Big 3 fight to turn heads of foreign car owners
Clark and Shelly Brinton of Meridian, Idaho, checked out the sporty Nissan 350Z, but were won over by GM's new import-fighter. "When I saw the (Pontiac) Solstice, I fell in love with it," says Shelly Brinton.
Tempted by a domestic?
As U.S. automakers struggle to fend off foreign rivals and boost earnings, they're striving to duplicate the success of the Chrysler 300 to win back import drivers and reverse some ominous trends. If you drive imports, have you seen any new American cars that have tempted you to switch?
Pontiac Solstice
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At Southfield Chrysler Jeep, car dealer Dan Frost knew he had a winner when customers started turning in Toyota and Lexus vehicles to drive off in a Chrysler 300 sedan. "We very seldom ever see those trade-ins," he said.
But Chrysler counts two Japanese brands among the 10 most common trade-ins for the boldly styled, rear-wheel-drive 300.
As U.S. automakers struggle to fend off foreign rivals and boost earnings, they're striving to duplicate the success of the 300 to win back import drivers and reverse some ominous trends.
Detroit's carmakers are not only losing sales to Asian rivals, they are also losing choice customers as U.S. consumers increasingly separate into two camps: import buyers and loyalists to domestic brands.
Overall, buyers of domestic-brand vehicles tend to be older, less educated and less wealthy than owners of import brands. Over the past 10 years, the gap in income and education has widened, with the most desirable customers flocking to foreign brands.
"The income is a worrying sign," said David Ensing, director of automotive research at St. Louis-based Maritz Inc. "If you're not keeping up with other manufacturers, it probably means some of your more profitable customers are going away."
Most of those customers never look back, according to data showing that import buyers may switch brands but rarely return to domestic nameplates.
"A lot of people have gone to the Japanese, and it'll be tough for the domestics to get them back," said George Peterson, president of consulting firm Auto Pacific.
"Consumers were burned in the late 1970s and 1980s, and this is still hurting domestic manufacturers," he said. "They deserve to get (people) back, but it'll be tough."
This year, General Motors Corp. and Ford Motor Co. are rolling out new models designed to win back customers from foreign brands, which now hold 40 percent of the market. With the launch this month of the Pontiac Solstice, starting at $19,995, GM scored a conquest with its first sale, to Shelly and Clark Brinton.
The Meridian, Idaho, couple also own a Honda Accord, a Mazda Protege and a GMC Yukon Denali truck. "I've always wanted a little roadster. We looked at the (Nissan) 350Z, but when I saw the Solstice, I fell in love with it. The look, the price -- everything about it," said Shelly Brinton.
With the new Ford Fusion, a small car scheduled to hit showrooms in mid-September, Ford wants to hang on to owners of the Ford Focus compact as they move up to the midsize car segment. The top sellers in that category are the Toyota Camry and Honda Accord.
Ford is touting the Fusion's sharp driving dynamics and snappy styling, including two-toned stitching on the leather seats, to appeal to car buyers tempted by import brands. "We understand we're losing some customers today," said Dan Geist, marketing manager for the Fusion.
Buying American
The Chrysler 300 sedan, one of Detroit's biggest hits in years, helped DaimlerChrysler AG's Chrysler Group expand its customer base and market share by attracting import buyers. Some 16 percent of the trade-ins for the 300 are foreign nameplates, about double the average for Detroit manufacturers, the company says.
But generally, said Chrysler's brand marketing chief George Murphy, "I don't see a big shift in cross-shopping between traditional domestic producers and imports. That's one of the challenges we have -- to appeal more to the import buyer."
That's key to helping Detroit's automakers boost earnings and spend more on new equipment and technologies -- major selling points for successful import brands.
Across the country, but especially in the Midwest, many die-hard loyalists to the Big Three will not consider a foreign nameplate.
A survey conducted last month by Autobytel found that 48 percent of car buyers considered themselves loyal to American brands.
A similar study by J.D. Power and Associates found that 41 percent of buyers consider domestic brands exclusively, and nearly half of them do not consider imports because of their foreign origin.
But the proportion of U.S. car buyers who do not consider domestic brands was nearly as high -- 36 percent.
"It's surprising to us how many people are either squarely in the import camp or in the domestic camp and don't cross-shop between the two," said Chris Denove, a partner at J.D. Power.
While Detroit's automakers have more loyal buyers now, future customers may be more fickle.
"If you look at the domestic market, people who buy the domestic vehicles tend to be older in general," said Denove.
More fickle customers
Shoppers who look at what Detroit automakers are offering but end up buying Asian brands tend to be a bit younger. "The youngest group of all are those who say they won't consider a domestic vehicle in the first place," he said.
Those distinctions are blurring, however, as Asian automakers step up production in North America. Is a Camry built in Kentucky an American car? Is a Korean-built Chevrolet Aveo an Asian or American car?
For many consumers, it's a question of image. "That plays into the perception whether or not the brand or models are for 'people like me' as opposed to 'people like them,'" said Daniel Gorrell, vice president at Strategic Vision, a California market research firm.
Hannah Miller Lerman, 31, and her boyfriend are ideal customers. He owns a natural foods company in Mill Valley, Calif., and she works with him and has an MBA from UCLA. They bought a Volkswagen Touareg in June after a friend recommended the German SUV.
"Neither of us had owned a VW, but a good friend did, and that was somewhat convincing for us, to know that other like-minded people had made the same decision," said Lerman.
The divergence between import and domestic buyers became evident in June, when GM's pitch to extend employee discounts to all buyers hit Ford and Chrysler hardest. They matched GM's program in July, and Detroit's automakers have cut sticker prices on some of their 2006 models.
By contrast, leading Japanese automakers Toyota Motor Co. and Nissan Motor Co. have announced price increases on 2006 models.
The best and the brightest
Over the past decade, Japan's biggest automakers have been the winners after picking off mainstream buyers from domestic automakers and luxury car customers from premium German brands with tarnished reputations.
In the process, they have built an attractive customer base. "In terms of customer demographics, European brands are still out front, and the Japanese are after that, and then the domestics and the Koreans," Ensing said.
In 1995, the household income of U.S.- and Japanese-brand vehicle owners were roughly equal, and the difference in college education levels was 12 percentage points.
Since then, the average household income of Japanese-brand owners has grown 46 percent, to $97,228. Over the same period, incomes of domestic-brand owners have risen 32 percent, to $85,187.
The percentage of U.S. brand owners with a university degree has risen slightly to 45 percent, compared with 63 percent for the Japanese brands -- an 18-point gap -- according to data compiled by Maritz, a consumer research firm.
"In general, automakers want people with high incomes," said Ensing. Wealthier buyers tend to buy more expensive vehicles and replace them more often. European luxury carmakers, such as Mercedes-Benz and BMW, have always built cars for the wealthy and tend to have the richest customers.
But GM made surprising inroads with elite consumers in 2002 with the launch of its first Hummer vehicle, the large H2. The average household income of a Hummer owner -- $150,000 -- is on a par with that of a Mercedes owner, according to Auto Pacific. But Hummer fans tend to be self-made. Only 38 percent have college degrees, compared with 68 percent of Mercedes owners.
Full-range automakers need to reach out to every age and budget. Ideally, they want to attract young buyers with promising futures. "If you can get a 25-year-old to your brand, get them a product that performs reliably and good dealer service, it's relatively easy to get that customer to buy the next five vehicles from you," said Denove.
Two-front war
Although the Japanese attract more new customers than Detroit's automakers, they have reasons to worry, too. Not only are domestic automakers mounting a belated but vigorous defense, but the Koreans are stepping up their assault.
"In terms of demographics, the Japanese are fighting a two-front war," said Art Spinella, president of CNW Marketing Research in Bandon, Ore.
"Kia and Hyundai are doing to the Japanese brands what the Japanese did to the Big Three in the 1970s," he said. "You see some of the second-tier Japanese brands struggling," such as Mitsubishi and Isuzu, he said.
Toyota, meanwhile, is grappling with an aging customer base. When it launched the Camry 22 years ago, the average buyer was 37. Its buyer today is 50, on average.
Two years ago, Toyota launched the youth-oriented Scion brand to reach new customers. With the boxy xB, it is attracting young drivers likely to view a Camry as the right car -- for their parents.
A group of 16- to 22-year-olds surveyed by CNW rated the xB the least stodgy vehicle on the market. Buick cars were rated most stodgy.
But Toyota and Honda are also starting to see signs of erosion in the once-steadfast loyalty of their customers. Over the past couple of years, Honda and Toyota owners are cross-shopping more, although they still tend to stick with those two brands, Spinella says.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, said Detroit's automakers may have a shot at halting or reversing the current trends because of a general decline in brand loyalty.
As the number of nameplates in the U.S. market grows -- from 241 last year to an estimated 307 by 2010 -- new consumers will be tempted to cross-shop even more.
Domestic automakers also will benefit from a gradual realization that U.S. vehicle quality is now competitive. "There's still a gap between perception and reality," said Denove. "People tend to think import vehicles are a little better than they really are, and they tend to think that domestic vehicles are a little worse than they really are. It's beginning to change."
You can reach Christine Tierney at (313) 222-1463 or ctierney@detnews.com.
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