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We are in year two of the great supply chain crisis. There are a
handful of factors — from chip supply to
impacts from climate and conflict — as to when
"normal" production will return. Here is what we do know now:
profit margins are near historic highs for OEMs while consumer
loyalty scores are near historic lows. Here are the important data
signals for automotive marketers:
Loyalty challenged
Industry supply has been at or below 26 days for an
unprecedented 14 consecutive months. As observed in this chart (fig
1), lack of days' supply drives a direct drop in brand loyalty
— now below 50%, an eight-year low. This is
not only costly for OEMs in the near term, but the lifetime value
lost from defecting customers over the long term is
significant.
Luxury leads the decline, despite the Tesla
buoy
Luxury brand loyalty has outpaced the industry in loyalty
decline, now at just 46%. When you remove Tesla models from luxury,
it sheds another four points to 42%.
More than 7 out of every 10 (73%) return-to-market Tesla owners
buy another Tesla.
Another contributing factor is the sharp decline in leasing
— generally higher with luxury segment
— which has dropped 10 points since 2018 and
accounts for just 20% of new registrations in 2022.
Segment over brand: Utility reigns supreme
Loyalty to the SUV body style is growing and is now at an
all-time high of 74%. With nearly 150 SUV models, shoppers have an
abundance of choice and will more easily leave brands that don't
have the desired Utility vehicle available. For the first time,
more car owners are buying a Utility (47%) instead of another car
(42%).
Utility-to-Utility migration for in-market shoppers has grown
48%, nearly one million units, in the past five years
Going bigger is getting bigger. About half of those gains come
from up-sizers, households that moved into a bigger Utility have
grown 93% over the same time period (fig 2)
Recovery will fluctuate by region
Since the beginning of 2022, inventory levels have been trending
up, but the lifts are relatively low, and recovery varies by
market. The nation's top market, California, has inventory levels
~20% higher than the state's low in late 2021. Meanwhile, in number
two state, Texas, inventory has increased at a slower pace,
improving less than 10% from its 2021 low.
How marketers are responding:
Even with record profits, smart, healthy brands are
staying in front of customers Data strategies and marketing dollars have responded to
marketplace conditions. There has been a shift from in-market and
incentive messaging to vehicle acquisition, EV and service
initiatives. At an investment and activation level, Polk Automotive
Solutions by S&P Global Mobility has seen monthly activity
across Trade-In, Service, EV and Future In-Market audiences
increase 2x since the beginning of the year.
At the retail level, dealerships have developed responsive
messaging and targeting strategies that best match audience
segments with inventory, adjusting monthly to align with available
vehicles, both new and used.
From OEMs, we see brands increasing their efforts to search for
Lost Souls or Orphan Owners—
the second or third owners/sellers of a vehicle. Recruiting these
owners into their CRM programs with specific offers can develop
long-term customer value.
The great data race: Fortifying CRM programs for peak
performance
Auto marketing's biggest competition is taking place in
first-party data arenas. The increases in identity complexity are
growing. The headwinds of data restrictions are stronger.
Advantages will go to those that know the most about their
customers and prospects and what motivates them through their
first-party data. Best practices include:
Go beyond the most recent purchase to develop complete garage,
financial and household profiles
Reduce waste by verifying ownership
Append, enhance, and cleanse lists regularly
Conclusion
S&P Global Mobility expects the chip supply shortfall to
improve further in 2023 with increases in chip fabrication being
better aligned with demand in 2024. OEMs and dealers should be
mindful of the growing wedge between profit margins and eroding
consumer loyalty as the long-term implications could be
substantial. As the EV transition approaches, the competition for
customer attention — particularly in the
Utility segment — will be fierce. Auto
marketers that can leverage loyalty, inventory insights, and
develop stronger customer connections, will be able to create and
tell their own success stories.
Conclusion
