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Domestic versus Imported Vehicle Loyalty
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.
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.
Automotive Loyalty Awards by IHS Markit
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.
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