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Impact of inventory shortages on market dynamics of the new vehicle industry in the United States

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As the industry struggles with exceptionally low inventory levels, an obvious question is what else is being impacted? Clearly, retail deliveries have been hit hard as we saw the SAAR plummet from April 18.5 to September 12.2. But one metric that has also had a substantial impact, but that doesn’t get the same visibility as retail deliveries, is brand loyalty. As the chart below indicates, as the industry days supply declined from its January peak, brand loyalty followed the same path, starting just a month later. The correlation coefficient between these two metrics is a robust 0.79, rising to 0.86 if the COVID months of March and April 2020 are removed.

Unsurprisingly, the loyalty of all brands was not equally affected. Among the 19 major brands, Ford, Subaru and Chevrolet are finding the largest direct correlation between daily supply and brand loyalty. Conversely, Buick and Mitsubishi are experiencing inverse correlations, which implies that as inventory dwindles, brand loyalty actually increases.

Within the luxury space, Lincoln, Porsche and Mercedes-Benz show the largest direct correlation between brand loyalty and offering, while Genesis has a slight inverse correlation.

This data identifies those brands whose loyalty decreases in the most direct correlation with stock shortages or those brands most vulnerable to defections in today’s environment. An effective marketing and / or conquest campaign will focus on these brands, bypassing those brands that seem most immune to inventory shortages.

Posted on 02 November 2021 by Tom Libby, Associate Director Loyalty Solutions and Industry Analysis, Automotive, IHS Markit

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