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It is hard to make it through five minutes in the United States
today without hearing the word "polarized," whether it applies to
the economic, political, or sociological landscape. But
polarization also exists in the US new vehicle business: based on
IHS Markit loyalty data, households with an import* in the garage
are substantially more likely to acquire another import when they
return to market, and, likewise, households with a domestic vehicle
are strongly inclined to stay with a domestic product for their
next acquisition.
Why does this matter? There are at least four reasons why this
polarization is noteworthy. First, it reveals actual underlying
market dynamics that need to be brought to light because, in some
instances, they contrast with perceived industry trends.
Second, the polarization of the industry is influenced by
product actions and therefore is somewhat controllable. Third,
awareness of this polarization can lead to highly targeted
marketing campaigns that are more efficient than the traditional
broader approaches. Lastly, and perhaps most importantly,
polarization implies that manufacturers and brands are
participating in just one section of the US market and not taking
full advantage of the opportunities across the entire 15+
million-unit industry.
Brands
IHS Markit loyalty data indicate that polarization occurs at the
brand and body style levels. Regarding brands, the data are
compelling: in the 46 months from January 2017 through October
2020, 84% of the import brand households that returned to market
and acquired a new vehicle stayed with an import (despite
accounting for only 60% of retail new vehicle registrations in the
same time period), and, similarly, 79% of domestic brand households
remained with a domestic (despite a market share of just 40%).
In the third quarter of 2020 by itself (the most recent quarter for
which complete data are available), 81% of households with an
import-branded vehicle in the garage acquired another import when
they returned to market (led by Lexus at 86%), while 77% of
domestic-branded households stayed with another domestic vehicle
(led by Chevrolet at 81%). Tesla's results fall in between these
two groups (see below), with 67% of Tesla households acquiring
another domestic vehicle. This makes sense: while Tesla technically
is a domestic brand, all its current products are positioned in the
luxury space dominated by imports and few, if any, of its operating
strategies align with the domestics.
In addition, polarization exists across all three of the most
popular body styles—pickups, sedans, and SUVs—which
together account for 88% of all new vehicle registrations through
the firsts 10 months of 2020.
Download the full whitepaper to learn more about domestic vs
import loyalty as it relates to pickups, sedans, and specific
demographics.
For 25 years, IHS Markit and its predecessor Polk, have
recognized automotive manufacturers who demonstrate superior
performance in customer retention. Winners in 2020 will be revealed
in March 2021. Previous years' winners can be viewed at
ihsmarkit.com/auto-loyalty.
