Tesla's enviable ethnic loyalty continues to climb

Tesla’s enviable ethnic loyalty continues to climb

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Despite an uncertain market and its fluctuating prices,
Tesla continues to be the lead choice among ethnic buyers returning
to market

Loyalty is among the best indicators of customer satisfaction
with a given vehicle or brand. And for newer automotive brands,
establishing a cadence of repeat buyers can take decades.

Tesla, though, is already well on its way, establishing itself
as the leader in segment model loyalty for both the Luxury Small
Utility category with the Model Y, and Luxury Small Car category
with the Model 3 in 2022.

Tesla’s loyalty is particularly strong among the diverse
consumer base of ethnic buyers in 2022, especially among Asian
buyers. Among African American buyers, S&P Global Mobility data
shows that Tesla’s loyalty is 63.8% – more than 11 percentage
points higher than the industry average. Tesla’s loyalty among
Hispanic buyers is 67.4%, beating the industry average by 17.5
points, while its 72.1% loyalty among Asian buyers is a stunning 33
points higher than industry average.

Those numbers have been increasing sharply – and within a very
short time by industry standards. In 2017, Tesla’s loyalty among
overall ethnic buyers was 33.7%, lower than the industry average of
52.5%. By 2022, that had climbed to 70.0% against an industry
average of 48.1% according to S&P Global Mobility analysis.

Some of that loyalty breaks down not just to ethnicity but to
geography as well. “We see a lot of Tesla’s market share coming
from California, the most ethnically diverse state in the U.S. So
it’s natural, and a good thing they’ve been able to attract diverse
consumers to the brand,” said Vince Palomarez, product management
associate director for Market Reporting for S&P Global
Mobility.

For those who might question if California’s ethnic community is
more brand-loyal – thus bolstering Tesla’s overall percentages
because of its strong buyer base there – actually the opposite is
true. Compared to the national ethnic loyalty average of 48%, the
California ethnic buyer average is just 43% loyal. Only Tesla,
Rivian, Polestar, and Aston Martin have higher-than-average ethnic
loyalties in California, Palomarez stated.

How has Tesla achieved this loyalty so quickly? It’s due in part to
how quickly its customers come back for more. Tesla
leaseholders/lessees returned to market within 25 months on
average, five months quicker than the industry average.

For purchases, Tesla customers came back in just 23 months, a
whopping 18 months faster than average, according to the S&P
Global Mobility analysis.

“It’s very similar to Apple. When you own the iPhone and you
have an Apple Watch and you have a MacBook you’re very tied
together, a seamless transition moving from one device to another.
If you bought a Tesla and you purchase the charging unit for your
home, odds are you’re probably going to purchase another Tesla
because you have that infrastructure already built in,” Palomarez
said.

Going forward, however, Tesla’s once-leading-edge portfolio is
at risk of turning stale. Combine aging looks with droves of new
BEV competitors entering the scene, and Tesla could face obstacles
to maintaining loyal customers.

“Tesla does a lot of over-the-air updates, but in terms of sheet
metal redesign, they’ve had nothing new since the Model Y came out
in January of 2020,” said Tom Libby, associate director of loyalty
solutions and industry analysis for S&P Global Mobility. “And
the Model S sheet metal is nearly identical to the car that came
out almost 10 years ago. In this industry, that poses a bit of a
challenge.”


This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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