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Fewer Choices for Loyal Ethnic Sedan Owners Opens Marketing Opportunities – and Challenges – for OEMs, IHS Markit says
23 September 2019
While many automotive manufacturers are abandoning sedans in
favor of crossovers, SUVs and pickups, not all U.S. consumers are
following suit at the same pace, according to new analysis from
business information provider IHS Markit (NYSE: INFO).
Ethnic consumers are among the fastest growing new vehicle
consumers in the U.S., according to IHS Markit, and represented 28%
of new vehicle purchases annually in 2018. When returning to market
for a new vehicle, African Americans are most loyal to the sedan
body style, with a 52% loyalty rate, based on analysis of new
vehicle registrations January through June 2019, the most recent
data available. In the same timeframe, 47% of Hispanics are also
loyal to sedans, as were 45% of Asians. These groups are migrating
from sedans at a slower rate than the overall industry - which is
migrating at a rate of 45%.
While crossovers are the clear segment leader for the industry,
ethnic consumers continue to have a significant stake in sedans,
which make up a larger percentage of the total return-to-market
volume for ethnic consumers, compared to the industry. For example,
38% of African Americans who returned to market to buy a new
vehicle in the first half of the year, purchased a sedan. This is
nearly 12 percentage points above the non-ethnic population at 26%.
This fact illustrates that ethnic consumers, like African
Americans, still have an affinity for the sedan body style, and
OEMs must be strategic in enticing these consumers into other body
styles.
The shift in plans by some OEMs will create a bit of a marketing
challenge for certain automakers, who seek to position their SUVs
and crossovers with this important audience as they return to
market for a new vehicle. It also creates opportunity for those
automakers who will continue to offer sedans as part of their
lineup, since ethnic consumer groups may consider a brand shift if
they cannot get a new sedan from their current manufacturer. In
addition, the brands keeping sedans as part of their portfolio have
traditionally been popular with ethnic consumers in the past, and
we expect this to continue.
"Brands without sedans in their lineup will need to essentially
double down on their marketing efforts to entice ethnic consumers
to migrate from the cars they prefer to the new pickups, crossovers
and sport utility vehicles they don't know," said Toni Iverson,
automotive diversity consultant at IHS Markit. "This poses a real
challenge for marketers, because ethnic consumers have had such
high loyalty rates to sedans," she said.
Some brands without sedans are already working on these efforts
and are making progress. Ethnic campaigns are underway at several
OEMs, with some gaining traction in converting sedan owners to new
body styles in their lineup. As automakers strive to attract these
growth audiences and plan future products, understanding the
dynamics and preferences of the ethnic consumer will be more
important than ever.
About the Methodology
Loyalty is determined when a household that owns a new vehicle
returns to market and purchases or leases another new vehicle of
the same segment, make, model or manufacturer. For the purposes of
this analysis, IHS Markit focused on segment level loyalty.
IHS Markit analyzes loyalty throughout the year and regularly
works with its customers to effectively manage owner loyalty and
conquest efforts through in-depth research and analysis of
automotive shopping behaviors, related market influencers, and
conquest and retention strategies. This analysis is based on more
than 6.2 million new personal vehicle registrations during the
first 6 months of the 2019 calendar year, which ran from January 1,
2019 through June 30, 2019.
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The above article is from AutoIntelligence Daily by IHS Markit. Every working day, AutoIntelligence Daily provides about 30 articles focused on automotive news, events and trends. Get a free trial.
