Brand loyalty in the US light vehicle market rose from 49.2% in
September 2022 to 50.3% in October, the first significant increase
since January (putting aside the slight improvement from July to
August). October also is the first month since April in which this
metric has surpassed 50%.
Looked at from a broader perspective, brand loyalty has been
declining since March 2020 when it stood at 56.3%, immediately
before the start of the pandemic and the start of the supply chain
challenges.
Days’ supply began to increase earlier than brand loyalty,
rising to 26 days in June after languishing at 25 days or less
since May 2021. Although this metric backtracked slightly to 24
days in July, since then it has been improving, rising to 27, 30,
and 32 days in August, September, and October, respectively.
Given the strong direct correlation between brand loyalty and
days’ supply (.83 from January 2020 through October 2022, .88 if
Covid-impacted April 2020 days’ supply of 120 is removed), along
with the rise in days’ supply that began last summer, it is not
surprising that brand loyalty has inched up.
Historical model, brand, and manufacturer loyalty rates are also
strongly correlated with one another; model and brand loyalties
have a .99 correlation, while model and corporate loyalties have a
.98 correlation. Given these relationships, it is understandable
that model, brand, and corporate loyalties all rose in October
(month over month) after declining in general since the beginning
of 2022 (see below).
Lastly, the September-to-October brand loyalty increase is in
keeping with the recent year-over-year changes in this metric. As
shown below, the declines in brand loyalty had been declining from
their peaks this past February and September 2021. The
year-over-year declines in brand, manufacturer, and model loyalties
in each of the three months from July through September 2022 all
were under 1.0 percentage point; these results contrast with drops
prior to this time period, back to the start of 2021, when the
year-over-year declines were above 1.0 (two months with exceptions
are February and June 2021 when the declines in model loyalty were
.89 and .46 percentage points, respectively).
Will brand loyalty continue improving? On one hand, an ongoing
increase would make sense given the recent five-month increase in
days’ supply. On the other hand, the just-released December
inventory level of 33 days* represents a decline versus November’s
34 days, suggesting that if the two metrics remain strongly
correlated, brand loyalty will remain mired in the 49-51% range
where it has been for the better part of two years.
*Source: Autodata
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Top 10 Industry Trends Report
This automotive insight is part of our monthly Top 10
Industry Trends Report. The report findings are taken from
new and used registration and loyalty data.
The December report is now available, incorporating November
2022 CFI and LAT data. To download the report, please click
below.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.
