Tesla leads in luxury brand loyalty, and it's not slowing down, S&P Global Mobility says

Tesla Inc. is a major force in luxury brand loyalty, and it is not slowing down.

That was the conclusion of Tom Libby, associate director and loyalty principal at S&P Global Mobility, during a webinar Tuesday.

The webinar, titled "Baker's Dozen: 13 Takeaways From Today's New Vehicle Loyalty Landscape," aimed to examine trends of brand loyalty data amid industrywide inventory shortages. The data was compiled from January 2020 through April 2022.

Brand loyalty is calculated by what percentage of customers choose the same brand when trading in or purchasing their next vehicle.

Overall, automotive brand loyalty fell since the beginning of inventory shortages in March 2021. Mainstream brands, such as Ford, Hyundai and Chevrolet, saw their loyalty rates decline from an average of 54.8 percent in the 14 months before the shortage began to an average of 52.1 percent in the 14 months after — a decline of 2.7 percentage points.

Luxury was hit far worse. The sector, which includes brands such as Lincoln, Jaguar and Porsche, had brand loyalty drop by 4.7 percentage points to an average of 46.3 percent in the same period.

The worst-hit luxury brands were Porsche and Land Rover, with Porsche's loyalty down by 8.5 points and Land Rover's down by 9.2.

However, Tesla was an exception to the rule. It was one of three luxury brands that didn't experience a decline in loyalty in that time, joining Maserati and Genesis, which are far smaller brands compared with Tesla.

When Tesla is taken out of the calculations, luxury declined by nearly an extra percentage point, landing at a decrease of 5.5 points to an average of 45.4 percent.

"Tesla's sort of, frankly, hiding a little bit of the luxury decline, which is really twice as much as mainstream," Libby said during the presentation.

Libby ruled out that Tesla was stealing customers from other brands.

The company's conquest/defection ratio, which shows how many customers are defecting to Tesla divided by how many are leaving the brand, was low compared with both luxury and mainstream competitors.

"Tesla's C/D ratio with the other luxury makes, with the exception of Land Rover, was down, which I found surprising. I thought that perhaps they were suffering because of Tesla," Libby said. "And overall mainstream is down also, which I also found a bit surprising."

Instead of poaching from other brands, Tesla is driving its success with internal loyalty, he said.

The Model 3, the company's dominant nameplate, is behind the trend. The vehicle's loyalty rate jumped by over 7.5 percentage points to an average of 62.2 percent.

That means about 62 percent of Model 3 customers from March 2021 through April 2022 already owned a Tesla vehicle.

Tesla's year-over-year loyalty rate was even better. Its March 2022 loyalty rate was 73.1 percent, compared with 49.1 percent in March 2021, equaling an increase of 24 percentage points.

Libby speculated on a few different reasons for Tesla's success in light of inventory shortages. The unique personality and brand-building of CEO Elon Musk is near the top of the list.

"I think he's an extraordinarily talented marketer. I say that going way beyond the cars, I think he's created an image of himself and of the brand that really connect with some people," Libby said.

Tesla's array of electric vehicle options could also be playing a factor, with owners having access to different in-brand segments, such as the Model Y crossover.

"The story here is that Tesla owners ... they're coming back to market in increasing numbers," Libby said. "But just as important, if not more important, they love the brand, and they're getting another one. So this is an ominous, frankly, ominous trend for the rest of the industry, something that has to be faced, and it has to be acknowledged."