Ford and General Motors, as you may have heard, are getting out of the small car business in America. Both say that this is because they need to invest in electrification and autonomy, and also because consumer taste has shifted. A new report says that brand loyalty for a huge chunk of buyers has also taken a hit.
Now, who am I to sit back and howl at the idea that there are consumers out there for whom the moment the news that the Chevy Cruze was cancelled thought to themselves, “That does it, Chevy, you are dead to me,” but Edmunds.com reported in a new analysis yesterday that something like that occurred in the time after Ford and GM made their announcements last year:
The analysis revealed that instead of jumping on the SUV bandwagon, 42% of Cruze and Focus owners are choosing to stay in the passenger car segment. So far this year, 23% of Cruze owners and 31% of Focus owners who traded in their car for another car bought from a competitor.
Buyers are instead going for the Asian brands, which have kept up or even increased their small car lineups to pick up the slack. Ford and GM customers went for cars like the Hyundai Kona, Jeep Compass, Subaru Crosstrek, Toyota Corolla, Honda Civic, or Kia Forte, all sensible options, so perhaps this is for the better for people actually buying the cars.
But for Ford and GM, it’s pretty curious, since small cars are gateway drugs for automakers, aimed at capturing younger, cost-conscious buyers early while hoping to keep them in the family as this hypothetical buyer grows older and accumulates more buying power and can afford a big truck or SUV. Or at least that has been the prevailing theory for decades. “A car for every purse and purpose” and all that.
Ford and GM are betting, I guess, that the truck and SUV boom will last long enough to bridge the gap between the shift from internal combustion engine vehicles to electrified ones, when old concepts about brand loyalty may not matter.
That seems like a lot of risk, though perhaps less risky than continuing to sell the Focus and Cruze and hoping that people will buy them and conclude at the end of their ownership experience that the company they had purchased their car from had made something well-built, interesting, and good, and was worth their loyalty.
The brand loyalty of former Cruze and Focus owners has been steadily declining in the last three years. The percentage of Focus owners trading in their vehicle and buying another Ford has declined from 40% in 2016 to 33% through September of this year. The drop in brand loyalty is more pronounced among former Cruze owners: 45% elected to trade in their Cruze for another Chevrolet vehicle so far this year, compared to 57% in 2016.
This would all be funny if it weren’t so sad since it’s also worth mentioning that GM, especially, had a hard time making money off of their sedans because of discounts and other incentives. Making cars is hard.