Sales of hybrid and battery electric vehicles (BEVs) have grown
exponentially over the last few years; however, a larger question
faces the industry: where do these buyers go next when returning to
market?
Through S&P Global Mobility's
automotive loyalty data, which analyzes new vehicle
registrations and return-to-market activity, we can track exactly
how these buyers behave when choosing their next vehicle.
Since 2020, the share of households that previously purchased
either a hybrid or BEV and then bought another new vehicle
afterward has steadily increased by an average of ~1 percentage
point each year. As of May 2024, these households represent close
to 10% of total industry return-to-market share for the year so far
— more than double the percentage from just a few years
ago.
The increase in return-to-market share among hybrid and BEV
purchasers can be attributed to a growing portfolio of available
options, with the number of models in these vehicle categories
increasing by 12% and 157%, respectively, over the last four years.
As a result, the opportunity for dealers to retain customers is
stronger than it has ever been.
Recent results, however, show retention behavior differs
depending on fuel type.
When analyzing household return-to-market activity, we observe
that each buyer's loyalty to their previous fuel type varies when
making their next purchase. In the case of households that
previously came from a gas vehicle, they tend to be more stable,
with more than 82% of them purchasing another gas vehicle. For
those gas households that choose an alternative powertrain instead,
they are more likely to prefer a hybrid over a BEV, as 9% choose
the former vs. 6% who go with the latter.
For hybrid households, on the other hand, choices are more
distributed across all fuel types. Hybrids can be viewed as the
mid-point between a gas and electric powertrain, yet only 15% of
hybrid owners choose a BEV for their next purchase. Instead, they
are split evenly on remaining with another hybrid (41%) or moving
back to a gas powertrain (41%). The lack of movement to BEVs could
persist due to continued struggles in building a prevalent charging
infrastructure along with a slowdown in EV demand.
For returning BEV households, there are two different patterns,
depending on how you view the data. On the surface, when looking at
all BEV return-to-market activity, there is an overwhelming
commitment to the powertrain with ~68% of these households
remaining loyal to the fuel type. However, a key driver of this
loyalty is the strong retention and popularity of Tesla, which
accounts for most of these households. Tesla's industry-leading 67%
brand loyalty, and 65% share of all BEV return-to-market volume,
makes them the primary driver of any activity among BEV owners with
the household's next purchase.
However, without Tesla in the mix, return-to-market activity
among the rest of BEV households shows less of a commitment to the
electric powertrain. Only 47% of non-Tesla BEV households choose
another BEV vehicle for their next purchase, preferring instead to
move to either a gas vehicle (38%) or a hybrid (14%). Although the
highest percentage of return-to-market activity remains in a BEV,
the difference in movement to either a gas or hybrid vehicle
signals these households may not be as committed to the electric
powertrain compared to a Tesla household.
The Tesla effect among BEV households can better be explained
when comparing loyalty to fuel type versus brand. Given its early
market entry, Tesla had the advantage of building a reputation as
the leader in this field, yielding strong loyalty to the brand as
well as the fuel type.
When looking at all BEVs, the results show these households have
high loyalty to the fuel type (68%) and the brand (58%). But if you
just looked at Tesla, the loyalty numbers are even higher (76% fuel
type / 67% brand). Removing Tesla from the mix causes a drastic
shift, with loyalty to the fuel type dropping to 47% and brand
loyalty falling to 42%. These numbers are more in line with hybrid
vehicles (41% fuel type / 40% brand).
While an assumption could be made that the lower fuel type
loyalty can be attributed to non-Tesla buyers having more gas
options within the brand they purchased an EV from, this is not the
case. What the data shows is non-Tesla households, who come from
either a hybrid or BEV, are not very loyal and are more likely to
defect away from both the powertrain and brand with the next
purchase.
Although the current state of retention among hybrids and BEVs,
outside of Tesla, is challenging, continued investment in
infrastructure and new model production could help strengthen these
numbers in the future. Growing familiarity with the technology and
a larger pool of available options will help in giving returning
households more reasons to commit to alternative powertrain
vehicles with their next purchase.
Register for our loyalty trends webinar.
Demo our loyalty analytics tool.
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