Why Tesla’s loyalty rate is ‘ominous’ for the rest of the

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.”