SOUTHFIELD, Mich. (January 28, 2020) – In an era when many auto manufacturers are shifting their future product plans away from sedans in favor of utility vehicles, recent analysis from IHS Markit (NYSE: INFO) has found that the growth rate of those households with sedans acquiring sport utility vehicles (SUV) is slowing in the U.S. market.
At the same time, the likelihood of acquiring another sedan continues to decline as well, and the rate of decline is slowing. This trend is occurring in both mainstream and luxury brands.
Re-Purchase Patterns Among Mainstream Brands
Among mainstream brands, the percentage of households with a sedan in the garage that acquire an SUV when returning to market continues to grow, but that growth is slowing. Specifically, the percentage of mainstream sedan households acquiring an SUV increased 3 percentage points from 2016 to 2017 and 3.3 percentage points from 2017-2018, but the increase was just 1.6 percentage points from 2018 to 2019, based on the most recent available data.
At the same time, loyalty to sedans, while continuing to decline, is declining at a slower rate. In the time period from 2016 to 2017 the decline was 3.3 percentage points; and from 2017 to 2018, 4.2 percentage points. In contrast, from 2018 to 2019, the decrease in sedan loyalty was just 1.1 percentage point.
Trends More Pronounced in Luxury Space
This slowdown in sedan households acquiring an SUV is even more pronounced in the luxury space. Owners of a luxury sedan that returned to market in the first 11 months of 2019 were more likely to acquire another sedan than similar households a year earlier. Among households with a luxury sedan in the garage that returned to market, the percent that opted for an SUV rose 3.3 percentage points from 2017 to 2018, but from 2018 to 2019 it rose just 0.8 percentage point.
Furthermore, luxury sedan loyalty increased slightly from 2018 to 2019, after dropping in the prior three years.
Brand Origin Impacts Sedan Retention Rate
Predictably, the sedan body style retention rate is higher and increasing for import brands registered in the U.S., which continue to market a full range of sedans. Conversely, the sedan retention rate is lower and declining for the domestic brands, several of which have discontinued a majority of their sedan offerings. Households with an import sedan in the garage now are more likely than they were a year ago to acquire another sedan, while this metric for domestic brands continues to decline at a significant rate.
Sedans Still Provide Opportunity in this Dynamic Market
Plans by some OEMs to discontinue sedans will create a marketing challenge, as sedan owners returning to market will need to be converted to another body style to remain brand loyal; however, an opportunity is emerging for those automakers retaining sedans in their lineups, as owners seeking to remain loyal to the sedan body style will need to make a change from their existing brands.
“Those brands without sedans in their lineup must carefully consider their future marketing efforts to entice these loyal consumers to migrate from the cars they prefer to new pickups and SUVs that may be unfamiliar to them,” said Tom Libby, IHS Markit loyalty principal. “Likewise, those OEMs that are retaining sedans will have some significant conquest opportunities, and it will be interesting to see how the competitive dynamics play out,” he said.
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. The newly acquired vehicle may be an addition to the garage, not necessarily a replacement. For the purposes of this analysis, IHS Markit focused on body style loyalty. The Loyalty team at 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 new personal vehicle registrations in the U.S. during the first 11 months of the calendar years evaluated, including 2015-2019. For the purposes of this analysis, 14 mainstream brands were included: Buick, Chevrolet, Ford, GMC, Honda, Hyundai, Jeep, Kia, Mazda, Nissan, Ram, Subaru, Toyota and Volkswagen. The following 16 luxury brands were also included: Alfa Romeo, Acura, Audi, BMW, Cadillac, Genesis, Infiniti, Jaguar, Land Rover, Lexus, Lincoln, Maserati, Mercedes-Benz, Porsche, Tesla and Volvo.
About IHS Markit ( www.ihsmarkit.com)
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