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Fewer Choices for Loyal Ethnic Sedan Owners Opens Marketing Opportunities – and Challenges – for OEMs, IHS Markit says
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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