Another Straw on the OEM’s Back

As if COVID and chip shortages aren’t enough.

By Gary S. Vasilash

According to analysis firm IHS Markit, the automotive OEMs aren’t maintaining the level of loyalty with their customers that they once did.

In fact, the firm’s data show that brand loyalty dropped to a six-year low in June.

Looked at from a year-over-year perspective, the aggregate of April, May and June 2021 has a loyalty rate of 51.6% compared to 54% during the same period in 2020.

However, the type of vehicle that a person picks is something to which loyalty remains strong, reaching 55.5%.

In other words, if you have a Ford pickup truck and were out there in April/May/June for a new vehicle, there is a likelihood that you bought a pickup truck—not necessarily a Ford.

Or as IHS’s Tom Libby, associate director of loyalty and industry analysis, put it, “Households with a pickup in the garage like the concept of a pickup, and therefore will acquire another one.

“But their likelihood of their staying loyal to the brand of their pickup has diminished.”

One of the explanations that IHS has is that because of the chip shortage there are few vehicles on dealer lots. So if the theoretical shopper went out to a local Ford store for a new pickup and failed to discover anything that met their wants/needs, it very well may be that they’d go to a Ram or Chevy store, something that used to be uncharacteristic.

While the chip shortage undoubtedly plays a non-trivial role in this, there is another consideration: some buyers are simply more willing to try things that they may not have a few years ago.

Consider this the Amazon Effect: You put “wiper blades” into its search bar and it brings back some 8,000 results, brands you may have never heard of. So you try something new. It works. Then you search for something else. Again, lots of results. Maybe you’ve always only used Crest, but Colgate is something you’ve heard of, so you try it.

While this is not to say that a pickup truck and a tube of toothpaste are analogous, it is to say that if you can’t get the features you want on that Ford pickup that you can on the Chevy or Ram, there may be more willingness to take the option, especially as those are brands with which you’re familiar.

This doesn’t mean that brand loyalty is something that will disappear.

It is to suggest, however, that this is going to be an even-greater challenge for incumbent companies and challenger brands.

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