Growing Inventories Strengthen Brand Loyalty

Loyalty among vehicle buyers grows when there is more to choose from, whether more inventory, more brands or more models of a specific make are available, as indicated by this year’s S&P Global Mobility Loyalty Awards.

“Brand loyalty levels are trending upwards for the first time since 2019,” says Vince Palomarez, product management associate director for loyalty at S&P Global Mobility. “Inventory recovery is a big reason.”

The pandemic effect is still being felt, however. “(Loyalty levels) are not returning to market at pre-pandemic levels,” he says during a recent online presentation. 

Loyalty is determined when a household that owns a certain vehicle returns to market and acquires another new vehicle of the same make, model or manufacturer as a replacement or addition to the household fleet.

S&P Global Mobility analyzed 12.6 million new U.S. retail registrations during the 2023 calendar year to determine the winners.

In 2023, 7.6 million households returned to the market, a 9% increase over 2022, says Palomarez.

“The market is starting to recover,” he says.

Having multiple brands, models and makes across segments for consumers to choose from helped General Motors repeat its win for overall manufacturer loyalty, says Palomarez.

“Internal migration is a key driver for GM loyalty,” he says. “The more variety a customer has in a brand or manufacturer, the more likely they are to return.”

With the Buick, Chevrolet, GMC and Cadillac brands, GM has multiple offerings in 11 of the 21 segments it competes in, says S&P.

In the pickup segment alone, GM brands represent 17% of total industry volume, says Palomarez. “More pickups help GM keep customers within the brand,” he says.

Having more inventory underpinned several wins. Acura was a first-time winner in the most improved make loyalty category, says Palomarez.

“Changes in make loyalty and changes in inventory have a very high correlation. That helped Acura,” he says.

Another first-time winner, the Lincoln Nautilus (pictured, above), also benefited from improved inventory, though incentives also played a part in Nautilus winning overall loyalty to make, Palomarez says.

The incentives boosted loyalty for the Nautilus, he says, and after they “got the ball rolling, inventory recovery helped contribute to sustaining that loyalty.”

The used-to-new segment also saw improvements in loyalty, and certified pre-owned (CPO) vehicles played a big part in that, S&P finds. When households that acquired a used CPO vehicle return to market and buy new, the brand loyalty is very high, says Tom Libby, associate director of industry analysis and loyalty solutions at S&P Global Mobility.

“Brands benefit from having a strong CPO program,” he notes.

Tesla Distortions

Tesla (Model 3, pictured below) again has an outsized presence in the awards, winning four categories: ethnic market loyalty to make, overall loyalty to make, highest conquest percentage and alternative powertrain loyalty to make. It is a repeat winner in all four.

The brand is the proverbial 800-pound gorilla, distorting some of the loyalty measurements.

For one, Tesla is an outlier among luxury brands in the correlation between number of models and brand loyalty, S&P finds. Tesla has few models but very loyal owners.

Those owners are also more loyal to the powertrain type than electric-vehicle owners overall.  “Tesla is masking the overall EV loyalty,” says Libby. “Almost half the (non-Tesla) households leave EVs when they return to market.”  

The Tesla factor also distorts the mainstream-to-luxury conquest picture, he says. Mainstream net movement to luxury declines if Tesla is removed from the luxury category, S&P data shows.

“If you pull Tesla out, the whole story changes,” says Libby. “It points to the affordability issue and the major influence of Tesla on overall migration. If you want to get the overall industry dynamics, you have to pull Tesla out.”

Ex-Tesla EV to EV loyalty fluctuates significantly among both luxury and mainstream brands, says the report.

And hybrids are gaining popularity as a defection powertrain type among EV owners, finds S&P. More than eight out of 100 EV households migrated to a hybrid in 2023, a five-year high, it says. Hybrid loyalty is also at a five-year high while EV loyalty has plateaued, says S&P.