Sales to Hispanics outpacing the market

Automakers are intensifying their pursuit of Hispanic car buyers in the U.S., and for one big reason: That's where the growth is.

In fact, Hispanic consumers could well be the auto industry's leading growth engine for the next 20 to 30 years, many industry executives and marketing experts believe.

In a period of booming new-vehicle sales, Spanish-speaking or Hispanic culture-identifying buyers are crucial to automotive brands' success. Last year, Hispanic buyers delivered 96 percent of Ford and Chevrolet's combined year-over-year retail sales growth, 33 percent of Nissan's, 35 percent of Toyota's and 100 percent of Honda's, according to IHS Automotive's Polk market data unit.

Total industry retail sales increased 5.9 percent last year, outpacing 2013 results by 921,636 cars and light trucks. But retail sales to Hispanic consumers rose 15 percent, contributing more than 250,000 sales to that increase, according to IHS.

And it is happening not just in those states where Hispanic demographics have always been strong, such as California, Texas and Florida, but increasingly in the Midwest and everywhere else.

"You just can't ignore it anymore," says Fred Diaz, Nissan's senior vice president for U.S. sales & marketing and operations. "There are more than 50 million Hispanics living in the United States, and they're driving the growth. It's going to become a bigger focus of what we're doing."

Toyota on top

The "Big Three" brands of Hispanic-market sales -- Toyota, Nissan and Honda -- are leading the hunt. Honda officials have been meeting with dealers around the country this spring to emphasize the urgency of marketing to Spanish-speaking communities in their cities. Nissan recently helped some of its most successful retailers from Mexico open dealerships in major U.S. cities to improve the brand's ties to Hispanic consumers.

Toyota has ranked as the top-selling brand among Hispanic consumers for the past 10 years, according to Polk data. The automaker has created a dedicated corporate department -- the Hispanic Business Strategy Group -- to direct Toyota, Scion and Lexus to greater prominence among U.S. Hispanic consumers.

Last year, Toyota brand's share of the Hispanic market rose to 16.9 percent from 16.7 percent in 2013, according to Polk. Among Hispanic consumers, Toyota is the top-selling truck brand in all but 14 states.

"Hispanics purchased one of every four Corollas we sold in the United States last year," says Pat Pineda, group vice president of the Hispanic Business Strategy Group in Toyota Motor's New York corporate offices. "They bought one out of every five Lexus IS's we sold.

"People hear that and they say, 'Hispanics have enough money to buy a Lexus?' And that shows you how fast this is all changing. Even for those of us who are engaged in this space, we're all trying to make sense of it and decide the best way to embrace what's happening."

For an auto industry that still holds to many practices and perceptions of decades past, the rise of Hispanic car buyers has been an astonishing market phenomenon.

In just the past 20 years, the Hispanic population in the U.S. has doubled from 27 million to an estimated 54 million today. U.S. government agencies estimate that it will double again by 2050.

The United States has absorbed ethnic waves throughout its history. But the millions of Germans, Italians, Poles and Greeks who arrived a century ago did not land in an economy dominated by car travel and hypercompetitive marketing. The Hispanic population presents modern-day auto dealers and manufacturers with 21st-century operating challenges:

• Many Hispanics need -- or prefer -- to speak Spanish.
• Many have no connection to the long-established advertising channels that dominate U.S. automotive marketing, such as network TV.
• Many perceive themselves as Hispanic or Latino even after several generations of U.S. heritage, and they look for products and services that specifically address their Hispanic identity.
• Some newer Hispanic arrivals may bring residency complications into the car showroom. Some have been thwarted by state laws from obtaining a driver's license. Some lack permanent U.S. residence status, making lenders reluctant to approve multiyear car loans.
• Some challenge car dealers with a different approach to sales -- for instance, by bringing entire families into a showroom to negotiate a vehicle purchase.

"There really needs to be some education and sensitivity training at dealerships," urges Marc Bland, vice president of diversity & inclusion at IHS Automotive, who has been tracking the Hispanic market change and consulting with automakers. "If you have several family members sitting there in the showroom, and the salesman is addressing all of his information to the young man, when in fact, it's his mother-in-law over there who's the one who is actually going to be buying the car, she's going to feel disrespected, and that deal might not happen."

The industry largely agrees on two things about the rapidly expanding Hispanic car market: It's big, and it's complicated.

The demographic term "Hispanic" encompasses people from different regions and different degrees of assimilation into the U.S. Also, some people from Spanish-speaking ancestries prefer the term "Latino."

Newcomers from Brazil, who speak Portuguese, do not use the word Hispanic at all. And in the great mix of Hispanic populations from different decades, including Puerto Ricans, Cubans and Mexican-Americans whose ancestors helped settle Texas, some speak nothing but English, some nothing but Spanish and some alternate depending on the circumstance.

"I'm really trying to find the right language to speak with the people who are coming in," says Boris Lopez, general manager of South Dade Toyota on the south side of Miami. His comment illustrates the task ahead.

Lopez is an immigrant from Venezuela. He took over the store's management in December 2009 when it was selling just 25 new and used vehicles a month.

The Miami market long has been known as a center of Hispanic consumers, due to the large population of Cubans who lived there for decades.

But even that population has roiled.

In 1990, 80 percent of Dade County's Hispanic people were Cuban -- many of them having lived in Florida for decades, with English as their accepted language. Today, the Cuban share of that population is less than half, as newcomers have poured in from Mexico and countries in South and Central America and the Caribbean, according to Sara Hasson, senior vice president of strategy & insights for the media giant Univision Communications, one of the leading monitors of Hispanic market trends.

Lopez says his store now sells 585 vehicles a month and 85 percent of his customers identify as Hispanic or Latino. Some customers want to speak English, some are Spanish-only and some negotiate in both languages.

"I have one salesman who does not speak Spanish," Lopez says, "and I don't know how he can survive. But I have several salespeople who can't speak any English. One of them sold 300 cars last year."

But that's also a problem, Lopez sighs.

"I tell them, 'If you don't speak English, I can't send you out for training. And if you can't get training, you can't make more money.'"

This year, Lopez arranged for Miami Dade College to teach morning English classes at his dealership. The program is voluntary, but employees who want to learn English must come to work an hour early to take the classes.

Toyota wants to help dealers sort out those issues, strategy executive Pineda says.

"The Spanish language is a glue that unites a lot of the Hispanic identity," says Pineda, a Californian of Mexican-American heritage. "But things continue to change. My children look at things very differently than my father did. We're seeing that many Hispanics don't want to be categorized. They're saying, 'Think of me because I like cars, but don't come at me because I'm Hispanic.' And you have to be really close to the customer and listen carefully to hear that."

For Pineda and Toyota, "getting close" is a multifront effort. Pineda acts as a corporate adviser to the National Council of La Raza, an organization that campaigns for the rights and economic status of Hispanic citizens. She regularly meets with the National Association of Latino Elected and Appointed Officials, a power group of 6,000 Hispanic government leaders around the country.

She carries Toyota's message to Hispanic community events and conferences around the country, typically taking Toyota dealers with her. She meets with Toyota dealer groups and confers with Toyota's U.S. marketing executives on the company's message to Hispanic customers.

"It's about more than advertising," Pineda says. "We've been doing this a long time. It's about understanding this consumer and being sincere in your effort to earn their trust."

Corolla's appeal

It also helps if you have an attractive car.

Dealer Lopez sold 96 Corollas last month -- many to South Florida customers who, like him, emigrated from Venezuela.

"Toyota does a great job of marketing the Corolla in South America," he says. "I think a lot of people come here who already perceive the Corolla as a luxurious car that they want."

Importing positive impressions is also part of Nissan brand's Hispanic-market strategy. Last year, Nissan brought three of its successful Mexico dealership groups to the United States to operate stores in Los Angeles, San Francisco and Houston. Other U.S. markets also are being considered for Nissan's Mexican retailers.

The brand has grown to capture a 26.2 percent market share in Mexico. And Nissan hopes that retailers from there will strike a chord of familiarity and trust among U.S. residents who moved here from Mexico in recent years.

The campaign already is showing results. According to IHS data, Nissan last year moved up in its U.S. market share of Hispanic consumers, from third place in the industry just behind Honda to second place now, behind only Toyota.

Nissan's Diaz declines to reveal what the automaker's next steps will be to continue winning Hispanic market share. But he vows it will happen.

"More Hispanics and Mexican nationals are moving to the United States every year," says Diaz, a Texan from San Antonio with Hispanic family roots. "There isn't a state in the union that doesn't have a large concentration of Hispanic consumers now. I've seen the numbers. I've tried to disprove the numbers and have challenged my people to refute them. But they are very real."

The campaign is taking automakers into some unfamiliar issues. One of them, Diaz acknowledges, is in how future advertising will be created.

Automakers spendmost of their ad funds on what is referred to as "general market" advertising -- meaning they use the familiar English-language content that Americans see on TV during an episode of "Dancing with the Stars" or in the pages of Sports Illustrated. But Spanish-language advertising has been a rapidly growing budget line for the industry.

In 2010, U.S. auto companies spent $497 million with Spanish-language media of all types to advertise. Last year, the spending topped $1 billion, according to Sara Hasson at Univision.

Hispanic marketing is becoming a key part of new-vehicle launch campaigns. Ford Motor Co. is directing part of the launch funds for the redesigned F-150 pickup into Hispanic media, including Fox's MundoFox channel. That can't hurt: The F series is the top seller in America -- yet among Hispanic consumers, it is outsold by the rival Chevrolet Silverado, according to IHS.

But as Spanish-language advertising rises in importance, Diaz wonders how all automotive advertising will be crafted.

"What is general marketing anymore?" he asks. "General marketing used to be a term that meant advertising to English-speaking people of Anglo descent. Not so anymore. Even with advertising that we do on network TV, we're very careful in our casting to show people who are Hispanic.

"My multicultural and my general agency, more and more, are becoming one and the same," Diaz notes. "We now have them both present in all of our meetings."

Speaking to an industry audience on the subject this year in New York, Diaz warned that Hispanic-market advertising must be specifically created for the Hispanic viewer.

Simply overlaying the Spanish language on ads created for a general market will fail, Diaz told the audience: "It must be authentic."

Another issue is recognizing where Hispanic consumers live.

Gina Jorge, head of multicultural marketing for American Honda Motor Co., says Honda has begun a series of dealer meetings in Dallas, Chicago, Orlando and Atlanta to urge more dealers to address Hispanic demographics. Honda is the No. 1 brand among Hispanic buyers in New York City and Los Angeles, Jorge says.

"But we recognize that there are a lot of emerging markets, and that's why our education message of cultivating the Hispanic consumer is something we'd like all of our dealers in every market to look at," Jorge says. "We're getting them to ask the question, 'Is this relevant in my market?'"

Jorge says the program will help dealers brainstorm on better understanding Hispanic customers, how to market more effectively to them and how to develop the dealership resources they need to handle the customer.

Toyota is on the same wavelength, according to Pineda.

"We all know that California, Texas, Florida and Illinois have historically had significant populations," she says. "But part of my work is to get Toyota looking at those growing Hispanic populations in Minnesota, Kentucky, the Carolinas and Arkansas. How can we establish relationships in those regions? It's something the company is absolutely mindful of."

She says it is still a work in progress. But the population wave is not waiting. The states with the fastest-growing Hispanic populations in the last decade were Alabama, Kentucky, South Carolina and Tennessee, according to census data.

Between 2000 and 2013, the U.S. cities of more than 200,000 people with the fastest-growing Hispanic populations were Charlotte, N.C., and Raleigh, N.C.

"In communities where there hasn't been a significant Hispanic market and now there is, there's going to be a significant learning curve for all of us," Pineda says. "But Toyota intends to work closely with its dealers on it.

"We see that the U.S. Hispanic market is key to new-vehicle sales growth and will be central to our success over the next decade," she says. "Latinos are the future."