Impact of inventory shortages on US new vehicle industry market dynamics

As the industry grapples with exceptionally low inventory levels, an obvious question is what else is impacted? Clearly, retail deliveries have been hit hard, as we've seen the SAAR plummet from 18.5 in April down to 12.2 this past September. But a metric that has also been impacted substantially, but one that doesn't get as much visibility as retail deliveries, is brand loyalty. As the chart below indicates, as industry days supply has been declining from its January peak, brand loyalty has followed the same path, starting just one month later. The correlation coefficient between these two metrics is a robust .79, rising to .86 if the March and April 2020 COVID months are removed.

Not surprisingly, not all brands' loyalties have been impacted to the same degree. Among the 19 mainstream brands, Ford, Subaru, and Chevrolet are seeing the greatest direct correlation between days supply and brand loyalty. In contrast, Buick and Mitsubishi are experiencing inverse correlations, implying that as inventories dwindle, brand loyalties actually rise.

Within the luxury space, Lincoln, Porsche, and Mercedes-Benz show the greatest direct correlation between brand loyalty and supply, while Genesis has a mild inverse correlation.

These data identify those brands whose loyalties drop in the most direct correlation with inventory shortages, or those brands most vulnerable to defections in today's environment. An efficient marketing and/or conquest campaign will focus on these marques while bypassing those brands that seem more immune to the inventory shortages.

Posted 02 November 2021 by Tom Libby, Associate Director, Loyalty Solutions and Industry Analysis, S&P Global Mobility