Gen-Y buyers and their attitudes towards cars

Between the end of the last year and now, there have been quite a number of new model launches - the Kia Forte, the Mazda2, plus new promo campaigns for the Peugeot 308. The Forte have been chalking up some pretty impressive registration figures, shooting pass the usual Tier-2 brand Nissan's models. It is now behind the Tier-1 brand of Toyota and Honda with their all conquering B-segment models; Vios and City. Though I must add, that the Forte is still behind by a very very very wide margin. The City easily sells 3 times more, average around 1,700 units a month while the Vios is way ahead of the two, averaging around 2,500 units a month, easily outselling its nearest rival Honda City. In March 2010, the Forte chalked up 568 units delivered but the figure is hampered by production capacity rather than demand. According to a source at Naza, the supply problem is mainly related to colour options. According to him, you can have the car the next day if colour is not an issue. Clearly there are some issues with the colour volume planning. Being a new model, it is common to see high registration figures in the early months, before the registration figures normalises. So it is still to early to come to any conclusion of the impact of the Forte locally.

Another rapid climber is the Peugeot 308, for the month of March, deliveries of the 308 is only 100 units behind that of the Toyota Corolla Altis 1.8, though it is still behind the class leading Honda Civic and Nissan Sylphy by a very wide margin. Registration data for the Mazda 2 is not available yet.

Over a casual dinner conversation with another executive from the industry, question arose on where did these customers come from? What were they driving previously because it is hard to find any conclusive evidence that either traditional leaders of Toyota or Honda are clearly losing sales (if any) to these new comers.

So here is the question, we know that Malaysia's TIV hovers around 530,000 to 540,000 cars, on good years we might see it touch 550,000 but rarely above that. How many more cars can the local market sustain if the local market is opened to even more choices? Because it looks like the new comers are attracting a group of people who are not interested in any of the current offerings, and probably decided to continue using their existing car, until now that is. Surely there are a lot of more people like this, who think that neither the Vios or City is worth their money.

Priorities Fail! LOL.
And this is the next question - on selling cars to young people in the current age of social media and Web 2.0. Not long ago a friend was having a casual chat with me on the idea of downgrading his existing Honda City. And this person is probably in the top 10 percentile of the earning population for his age. He could well afford to upgrade to a premium brand if he wants to. But instead he is thinking of lowering his car maintenance commitment so he can have more disposable income to spend on things that matter to him, like travel, food, investments, clothing, gadgets. To him, living a good life has little to do with driving a fancy car, so long as you have a decent set of wheels to get around it will do. And he is not the only one.

Another two more highly paid friends from the oil and gas industry are driving around in 10-year old Proton Wiras. Again, they refused to upgrade their cars for the same reason - they do not believe living a good life have much to do with owning a nice fancy car. Of the two, one of them also moonlights as a part time male model and was a Cleo magazine top 50 most eligible bachelor. Wherever he goes, women drop their panties, not literally of course but you get the picture. He certainly has no problems dating girls with his old jalopy. Anyway, if you depend on having a nice ride to date a girl, you must be pretty hopeless or have some attitude issues in the first place.

Having a nice ride might work in getting you a half drugged clubber girls to hit the sack with once or twice, but if that's your thing then it's all fine. All those men's magazines talk about what cars do girls dig - it's rubbish and it assumes that all women are dumb and shallow. In fact, I do believe having a high end ride might actually work against you in the dating scene. But that's another story.

Then there is another brilliant IT exec girl friend of mine, who has recently returned from a job assignment in US, where she went through an extensive list of leased cars - Chevy Malibu, Chevy Equinox and a Toyota Highlander. Upon her return here, she opted for a used Perodua instead. Not even a brand new model! Reason - her cars in US were leased and paid for by her company when she was there on assignment. She would never pay such ridiculous prices for cars here. She much rather spend on weekly spas, travel and other items to pamper herself better.

In this country, buying a car never makes any economic sense. You are much better off buying property. There are very little property market in this region that allows you to control a RM400,000 property with as little a couple of thousand ringgit. And that option is not going to last forever as the low down payment / zero holding cost schemes are government led efforts to boost domestic spending and spur the property market. It is likely to be retracted once the economy recovers. In developed markets like Singapore and Australia, often you need a lot more than 10% for a property down payment. And there are very strict regulations to comply before you can rent out / rent a property. Think about it - why would you put money down a depreciating value item like a car, that however good it is, still requires you to constantly dump money into it to keep it running, while its value goes down, when you can buy a property for just a little bit more money? And that is what these people I referred to earlier are doing. To them, buying an expensive car is a plain stupid move, all to put up a show to impress others.

As a friend once put it "Paying 33% of your salary to pay for your Kancil is the same as paying 33% for your BMW when you’re a doctor. Yes, you are living a better life by society standards, but are you living a better life by your own standard? Now if you are able to pay your BMW with only 20% of your salary, AND not committing that 13% extra to other commitments, I say that you can afford to live better. You now have MORE choices in life."

The previous generation sees owning a car as a rite of passage into adult hood. But like all new generations, the young always want to question and rebel against what is shoved down their throat by the old. The current gen-Y, those born in the 1980s, are more experiential driven people. For them, experiencing life is more important than accumulating "things to own." They travel more, read more, are more willing to take on overseas assignments (in fact they love it), save less but are more investment savvy. This might not be very apparent in a developing country like Malaysia but it is already very apparent in Europe, USA, even Singapore and particularly in Japan. I read in that in America, driving license issuance peaked way back in 1978 (12 million).

If you haven't notice, nobody put up "cars owned" in their Facebook page. One of the more popular "boxes" FB are cities visited and books read. Only car geeks in car forums would bother signing off with details of their car ownership / history. In reality, nobody else cares.

Today's top financial whiz kids in Manhattan or NY or London don't see owning a fancy car as status symbol. Heavy traffic, parking problems and charges, congestion charges (particularly in London) and tight regulations make car ownership not a very attractive proposition, even to those who can easily afford it.

Contrast this to the 1980s when Wall Street brokers and London's financial hub see the Porsche 911 as the car to have. Nowhere is this more apparent than the car park of Google's headoffice Googleplex in Mountainview, California. The most hip transport is not any fancy BMW or Bentley, but is a Segway. If you have to narrow it down to a car, then its very likely to be a Prius, but even so, it is not really that popular among geeks. By the way, Google has the coolest offie in the world. No wonder they are voted employer of the year many times over.


The young today are more interested in what gadgets they or their friends carry, what's their latest travel, their twitter / Facebook / blog post.

Cars are rarely the centre of their interest for the young in the way 50s and 60s America see them. Remember GM's Motorama dream in the 60s? Those drive through cafes and theaters. They are almost gone now. The young today are not convinced that they need to buy / own cars the way their parents are. This is especially true in developed countries with highly efficient public transport like Hong Kong, Singapore and Japan.

Japanese car makers are struggling to woo young Japanese to be interested in cars, and are now depending on new developing markets to sell their cars. It is a phenomenon that has not seen any improvement, but has only gotten more serious in the last 2 decades.

So how can car companies continue to woo the young to be interested in cars? Based on my own experience, I noticed that marketers from car companies have yet to learn what the media and FMCG industry have long realised. That as a marketer, you are never really competing just within your industry competitors, you are actually competing for consumer's attention and money. Why should I pay a monthly installment for a car when I can buy a property, or put the money into a trading fund, or currency trading, or even that fancy custom built Alienware notebook, or that Coach leatherware, that Tiffany diamond, or that trip across Europe or exotic South America, even that high premium insurance policy which is more important to some?