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Japan's Big Three Take Aim at Gens X and Y

By Joe Benton
ConsumerAffairs.com

February 22, 2006

• Auto Bailout Chief: GM's CEO Had To Go • Taxpayers Unlikely To Recover Full Auto Industry Investment • GMAC Changing Name to Ally Bank • New Car Sales Show Improvement From May • April Dismal For U.S. And Foreign Carmakers • Chrysler Files for Bankruptcy, GMAC Takes Over Financing • Auto Sales Stagnant, But Hope Appears • What Would a Chrysler Bankruptcy Mean For You? • U.S. Carmakers Getting More Federal Aid • GM Cuts More Jobs, Eyes China • New Car Sales Plunge in February • Car Buyers Seeking Higher Fuel Economy • Video: Do Women Really Hate Car Shopping? • GM Plans New Minicar, Electric Cadillac • GMAC Becomes a Bank • White House to Loan Carmakers $17.4 Billion • Chrysler Closing Car Plants for 30 Days • What Would a Washington-Designed Car Industry Look Like? • States Want Stronger Used Car Rule • Industry Troubles Cloud LA Car Show • Carmakers Get Neither Love Nor Money From Congress • Taxpayers Headed For Automotive Bailout • Time May Be Running Short for U.S. Carmakers • Feds Move Closer to Carmaker Bailout • New-Vehicle Buyers Turn to the Web in Record Numbers --- • More about Auto Sales ...

Japanese automakers are targeting young U.S. consumers with advertising designed to sell small, fuel-efficient subcompacts Gen X and Y .

The big three Japanese automakers stand to profit from runaway gas prices as they prepare to roll out a new batch of the small vehicles all the while spelling more trouble for the big three U.S. automakers still obsessed with gas-gulping muscle cars.

America is no longer demanding giant SUVs. Japan seems to know the lesson while Detroit is still learning.

The new subcompacts from Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. will deliver fuel economy in the 30 miles-per-gallon range at prices starting at about $12,000.

The Toyota Yaris sedan and three-door hatchback rolls out in March. The Yaris will be followed by Honda's Fit, a five-door hatchback in April, and Nissan's Versa hatchback in May and a sedan in the fall.

Toyota discovered the younger market with the popular and boxy Scion xB refrigerator look alike Gen X and Y consumers are snapping up. Last year Toyota sold Americans 156,000 cars in the Scion line.

The Asian automakers are counting on these young people who otherwise shop for used cars becoming Honda, Toyota or Nissan loyalists for life, moving up to larger and more profitable models.

"There are 64 million Gen Y buyers coming into the marketplace," said Jim Lentz, Toyota's group vice president and general manager. "We know when they come to market to buy a vehicle, new or used, they will spend on average about $15,000."

The most frequently mentioned reasons for the small-car boom are sustained higher gas prices and higher sticker prices for such popular compact models as the Honda Civic and Toyota Corolla.

Among American carmakers, only General Motors sells a subcompact. The South Korean Chevrolet Aveo outsold all other subcompacts in the U.S. last year, posting a 20 percent sales hike as dealers sold 68,085 of the cars.

The new entries from Japan are certain to cut into those GM sales numbers.

The Japanese subcompacts, which top out at roughly $15,600 for a top-of-the-line Toyota Yaris, come with a long list of standard and optional equipment. Their modern looks have little resemblance to the boxy cars of three decades ago.

Researcher J.D. Power and Associates expects sales of the smallest, cheapest cars to increase as much as 94% from 2005 to 2010 as new vehicles hit the market.

Subcompacts already are popular in Asia, Europe and South America, based on their better fuel economy and easy-to-park size.

A subcompact is typically 12 to 14 feet long, bumper to bumper. Of the new Japanese subcompacts, the smallest is the Toyota Yaris hatchback at 12.5 feet. A Honda Civic compact sedan is 14.7 feet long.

Known in the auto industry as B-segment cars, subcompacts are big sellers in Asia and Europe, where their size makes them ideal for shooting through traffic and narrow city streets. Fuel economy is important in countries where gasoline is $4.50 to $5.50 a gallon.

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