The recent US$3bn federally funded ‘cash for clunkers’ programme has created an unforeseen side effect in vehicle sales relating to owner loyalty, according to US analyst RL Polk & Co. Between July and August 2009, when dealer showrooms saw increasing traffic and vehicle sales, overall loyalty rates to a manufacturer dropped nearly six percentage points. Over the comparative two month period in 2008, owner loyalty rates stayed relatively flat.
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Chrysler and General Motors experienced the largest declines, with Chrysler suffering a drop of 13 percentage points in corporate loyalty from July to August, and General Motors experiencing a drop of nearly seven percentage points during the same timeframe, Polk said. Ford was the least affected of the domestic manufacturers, with a drop of six percentage points. Honda and Toyota experienced two and five percentage point declines in owner loyalty respectively based on the research firm’s monthly analysis.
“While the cash for clunkers programme drove sales, it also caused a lot of competitive cross-buying that hurt repeat sales to the same automaker. Our analysis supports that OEMs and dealers may not have realised the potential defections the C4C programme might bring. Whether this matters in the short-term, we think long-term loyalty needs to be a constant focus,” said Polk’s director of industry analysis, Lonnie Miller.
Industry-wide, contributing factors to the monthly spike in defections include low or depleted inventory levels of qualifying vehicles during a period in which attractive incentives existed for consumers, according to Polk.
GM’s planned phase out of Saturn may also have accounted for hurting some of the corporate loyalty GM received from these owners. For the first time in eight years, less than one in two Saturn owners are expected to stay with GM.
“The playing field was virtually leveled when all OEMs had the same incentives, and loyalty rates were adversely affected,” Miller noted.
“Given what happened between July and August of this year, this should make for an interesting final quarter for our model year period that ends in September,” Miller added. “With the loyalty rate drops we’ve seen based on cash for clunkers, we might expect some surprises in overall loyalty rates once results for the entire model year are analysed.”
Polk tracks industry loyalty on a monthly basis.
