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Younger consumer market proving a challenge for automakers

February 3, 2011
Americans likely will buy 1 million more new cars in 2011 than the 11.6 million they bought in 2010. But automakers navigating this recovery said it will be like no other.
A new and different market is emerging. It is younger, and it is challenged by a housing slump and nagging uncertainty over gas prices.
Studies show younger drivers might not be so interested in buying a new car.
It seems cars just don't grab kids the way they used to, which is a problem since people younger than 38 are expected to account for a larger percentage of the driving public than baby boomers by 2015, according to IHS Automotive.
"Many young people care more about buying the latest smartphone . . . than getting their driver's license," said Jim Lentz, president of Toyota Motor Sales. "That's a serious problem we need to address."
Meanwhile, RealtyTrac forecasts that lenders will repossess 1.2 million homes this year. People who are losing homes are unlikely to be shopping for a new car.
Rising gas prices, and their effect on buyers, will be the biggest wild card-especially with automakers churning out a bevy of new small, efficient cars.
So far, $3.10 a gallon is not slowing a buyer migration back to light trucks, a category that includes pickups, SUVs, crossovers and minivans. GM says gas prices could top $4 a gallon this year. But would that send drivers to the showrooms for new hybrids like the Ford Fusion or Honda Civic?
New jobs needed    
The future is brighter, but a robust auto sales recovery will depend on sustainable job creation, easier credit and a continued flow of attractive and affordable vehicles.
Pent-up demand now is driving much of the recovery. Tens of thousands of people have driven their old wheels about as far as they can go. The average vehicle on the road is more than 10 years old, according to consumer marketing researcher R.L. Polk.
The luxury market is getting a boost from the recent two-year extension of the Bush administration tax cuts, said Paul Taylor, economist for the National Automobile Dealers Association.
Leasing, which fell from about 27.5 percent of all new vehicle sales in late 2007 to 21 percent after the September 2008 financial meltdown, has bounced back to 28 percent, according to CNW Marketing, a research firm in Bandon, Ore.
And in the great middle of the market, the dynamics have changed. Even as unemployment begins to fall, people still have less disposable income.