How the Recession Hurt Brand Loyalty

First Up 09/24/12

September 24, 2012

How the Recession Hurt Brand Loyalty
Many consumers who are finally ready to buy a new vehicle after waiting out the recession are up for grabs. The longer an owner keeps a vehicle, the more likely the owner is to replace it with a product from a competing brand, according to data from R.L. Polk & Co. The decline in loyalty, though gradual with each passing year, means that many automakers and dealers will need to work harder to retain customers, reports Automotive News. Polk says the average American now keeps a new vehicle for about six years, up from around four years before 2007. The firm’s latest data show that 46.2 percent of consumers who go three years between buying new vehicles choose the same manufacturer for their next purchase. Loyalty rates decline steadily for each additional year, dropping to 39.8 percent at nine years. Adding to that trend, dealers and analysts say they have seen more consumers willing to cross-shop domestic and import brands recently, particularly after last year's earthquake in Japan caused vehicle shortages at many U.S. dealerships. On average, loyalty rates are likely to decline across the industry as pent-up demand from the recession is released. Click here for more on shifting vehicle loyalty trends.

Toyota to Add 21 Models to Hybrid Lineup
Toyota Motor Corp. put its weight behind its hybrid strategy Monday, announcing a plan to roll out a number of new models powered by electric-gas engines over the next few years and predicting robust sales. "We plan to launch 21 new or full-model-change hybrids" by the end of 2015, Takeshi Uchiyamada, Toyota's vice chairman and R&D head, said at a press conference. Confident in demand, the Japanese auto maker also said it expects to sell at least one million hybrid models a year globally between 2013 and 2015. Still, the company adds that costs must be cut further to increase profitability and spur sales. "Profits from conventional (gasoline) powered costs are still higher, so we need to reduce hybrid cars more in order to promote their diffusion," Mr. Uchiyamada told reporters. Mr. Uchiyamada said Toyota hopes eventually to localize production of some hybrids in the U.S., though it has neither made any decisions nor formed any detailed plans for that yet. The Wall Street Journal reports that the company will also introduce a small electric vehicle called eQ to such clients as local governments in the U.S. and Japan in December. Click here for further coverage of Japan’s plans for its hybrid lineup.

CBO: Electric Car Tax Breaks Cost $7.5 Billion
Federal budget analysts expect policies and tax breaks encouraging the purchase and manufacture of electric vehicles will cost about $7.5 billion over the next seven years. According to USA Today, the non-partisan Congressional Budget Office released a report Thursday on how federal tax credits have affected sales of electric vehicles. Those credits range up to a maximum $7,500 for the average plug-in hybrid. In the report, analysts said the lifetime costs of owning an electric vehicle are still "generally higher than those of a conventional vehicle or traditional hybrid of similar size and performance," estimating a plug-in vehicle costs, on average, between $16,000 and $19,000 more than a comparable gas-engine vehicle. But gas-electric hybrids, which also deliver large improvements in fuel economy, are selling for much smaller premiums over their gas-only counterparts. For example, the 2013 Ford Fusion hybrid that goes on sale this fall will have a base price of $27,995, about $5,000 less than the top-of-the-line Titanium gas-engine version with all-wheel drive. The CBO report said that an electric or plug-in hybrid would "require a tax credit of more than $12,000 to have the same lifetime costs" as a comparable gas-only vehicle. Click here for more on the cost of electric vehicles.

Alfa Romeo Plots Return to America
For the past three years, Sergio Marchionne has used the assets and resources of Italy's Fiat SpA to turnaround Chrysler Group LLC. Now, reports The Wall Street Journal, he's doing the reverse – employing Chrysler engineers, plants, and dealers to help Fiat become a true global automaker and break into the markets driving the future growth and profits in the auto industry. Key to his ambitious plan is the relaunch of Fiat's sporty Alfa Romeo brand in the U.S. in 2014, starting with a new two-seater sportster and followed by an upscale sedan, called the Giulia, according to Fiat dealers who were briefed on the strategy at a private meeting earlier this month in Las Vegas. Mr. Marchionne, the chief executive of Fiat and Chrysler, is hoping a big splash by Alfa in the U.S. market will serve as a springboard for China and other global markets, and help spur a surge in overseas sales to offset losses stemming from Fiat's exposure to Europe. To boost its chances in the U.S., he told dealers future models would have brand-exclusive engines that rely on technology from Fiat's Maserati and Ferarri units. Read more about Mr. Marchionne’s plans to bring Alfa Romeo to the U.S. here.

Damage Control: Which Cars Offer the Least Protection in a Crash
While all vehicles sold in the U.S. are required to meet a set of complex federal safety standards, and most cars get good grades in crash tests, as insurance loss statistics released by the Highway Loss Data Institute (HLDI) last week illustrate, some vehicles inherently protect their occupants better than others in collisions. Not surprisingly, reports Forbes, given that the laws of physics give an edge to larger cars in this regard, the models that tend to fare the worst are among the smallest rides on the road. Leading the pack among model-year 2009-2011 vehicles cited as having the highest frequency of personal injury insurance claims – by about twice the industry average – is the tiny Toyota Yaris. It’s followed closely by other small-car stalwarts including the Suzuki SX4, Chevrolet Aveo, Kia Rio, Nissan Versa, and Hyundai Accent. HLDI’s rankings are based on the frequency of claims made under an auto insurance policy’s personal injury component, which covers occupants of an insured vehicle. According to HLDI such data reflects at least in part how well a given model protects its passengers. Read about the other vehicles that demonstrated some of the highest insurance claim rates in HLDI’s study here.

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