In today’s U.S. new vehicle industry, with more than forty brands, over 300 models, and millions of potential vehicle configurations, it is incumbent on marketers to be aware of the underlying industry dynamics and how they both influence and reflect buying behavior. This IHS Markit presentation will focus on several data-driven insights into changes at the manufacturer, segment, brand, and model levels. Topics that will be addressed include continued increases in both brand and model loyalty and how to efficiently conquest in such an environment, the changing SUV landscape, the opportunities afforded by the hundreds of thousands of current “orphan” owners, and the evolving luxury landscape including its relationship with the mainstream market.

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Industry Trends Impacting
Marketing in 2020
Tom Libby, Automotive Loyalty Principal
5Trends

2. Confidential. © 2019 IHS Markit®. All rights reserved.
Industry has plateaued
Brands can no longer rely
on industry growth to drive
sales – it must be earned
2
Trend #1

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Recovery growth from 2008 recession has leveled off ~ 17 million
0
2
4
6
8
10
12
14
16
18
20
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
3
USnewlightvehiclesales(millions)
Source: IHS Markit
17.1M 16.8M

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Loyalty at all-time high for
both vehicle make and model
Reaching buyers most likely
to switch brands is key for
growth
4
Trend #2

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Both brand loyalty and model loyalty are at all-time highs
51.5% 52.9% 53.4% 53.6% 54.2%
25.1% 26.4% 26.5% 26.9% 27.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2015 1 2 3 4 2016 1 2 3 4 2017 1 2 3 4 2018 1 2 3 4 2019 1 2 3*
5
*Note: Q3 2019 includes July and August only.
Make Loyalty
Model Loyalty
0.6 points ~ 54,000 Sales

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Nomads have the highest volume of shoppers and lowest brand loyalty
6
Return-to-market mix by household type
28.9%
52.9%
18.3%
0%
10%
20%
30%
40%
50%
60%
Loyalist Nomad Super loyalist
Make loyal rate
59.2%
46.1%
71.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Loyalist Nomad Super loyalist
Time Period: August 2019 CYTD
Loyalty leaders
Ford ~ 77%
Lincoln ~ 77%
Subaru ~ 76%
Mercedes ~ 75%
Chevrolet ~ 73%
Honda ~ 73%

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SUVs will have more
competition joining the
segment….
…but the segment isn’t
growing
7
Trend #3

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SUV market share is plateauing
38.3% 39.1%
41.0%
42.8% 42.3% 41.6%
43.0%
44.5% 45.4% 45.5%
46.9% 47.2% 47.6% 46.8%
7.4%
9.4% 9.0%
5.9%
4.8%
2.8%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2016 1 2 3 4 2017 1 2 3 4 2018 1 2 3 4 2019 1 2
SUV y/y % change
8
Registration type: Total
SUVmarketshareandy/y%change

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The number of SUV entries in the market will increase 53% by 2025
9
0
50
100
150
200
250
Pickup Car Utility vehicle
2005 2015 2018 2019 2025
Source: IHS Markit Forecasting Practice
112 109
129
135
206
70+ models
added in 5 years

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Over 47 million SUV-owning marketable households
10
5.8 mil.
Luxury
SUVs
41.3 mil
SUVs
16.8 million
of these marketable
households display no
brand loyalty
Source:

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Discontinued brands and
vehicles create opportunity
in a flat market
11
Trend #4

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1.4 million households owning discontinued-brands are in market for new vehicle
12
Source:
Pontiac has highest OEM
loyalty rate ~ 49%

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Owners of recently discontinued sedans will be looking for a home
Continental
CT6
ELR
XTS
LaCrosse
Volt
13
Discontinued sedans
200
300
Dart
Fiesta
Focus
Taurus
Cascada
Regal
Verano
Caprice
Cruze
Impala
Sonic
SS
~ 6.5 million
marketable households
Source:
~ 44% loyalty
to sedan market
IHS Markit Loyalty Analytics August 2019 CYTD.

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Luxury brands sales can
come from outside
traditional luxury segments
14
Trend #5

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The luxury market will expand from 16 to 20 marques by 2021
15
Land Rover
Lexus
Lincoln
Maserati
Mercedes-Benz
Porsche
Tesla
Volvo
Acura
Alfa Romeo
Audi
BMW
Cadillac
Genesis
Infiniti
Jaguar
16 luxury brands today
Acura
Alfa Romeo
Audi
BMW
Cadillac
Genesis
Infiniti
Jaguar
Land Rover
Lexus
Lincoln
Maserati
Mercedes-Benz
Porsche
Tesla
Volvo
Lynk & Co.
Lucid
Rivian
Polestar
20 luxury brands by 2021

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~ ½ of conquests by luxury brands come from nonluxury segments
42.1% 41.6%
42.8% 41.8%
38.8%
50.2%
48.9% 48.4% 47.5% 47.2%
0%
10%
20%
30%
40%
50%
60%
2015 2016 2017 2018 2019
Total defection, % to nonluxury Total conquest % from nonluxury
16
Source: IHS Markit
Note: Data for all years are August CYTD.

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Nonluxury owners are stepping up to their OEM luxury brand at low rates
6.1%
5.9%
4.8% 4.8%
4.1%
3.7%
3.0% 2.9%
2.6%
0.3%
0%
1%
2%
3%
4%
5%
6%
7%
% of Volkswagen
defections going to
Audi
% of Toyota
defections going to
Lexus
% of Buick
defections going to
Cadillac
% of Honda
defections going to
Acura
% of GMC
defections going to
Cadillac
% of Ford defections
going to Lincoln
% of Hyundai
defections going to
Genesis
% of Chevrolet
defections going to
Cadillac
% of Nissan
defections going to
Infiniti
% of Kia defections
going to Genesis
17
Source: IHS Markit
Time period: August 2019 CYTD.
Audi
▲
VW
Acura
▲
Honda
Cadillac
▲
GMC
Lincoln
▲
Ford
Genesis
▲
Hyundai
Cadillac
▲
Chevrolet
Infiniti
▲
Nissan
Cadillac
▲
Buick
Lexus
▲
Toyota
Genesis
▲
Kia
Only VW & Toyota over 5%

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Leading luxury sedan households are increasingly acquiring another sedan
40%
45%
50%
55%
60%
2015 2016 2017 2018 2019
Audi Lexus MB BMW
18
Source: IHS Markit
Note: Data are August CYTD for every year.

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19
Industry has
plateaued
1
Loyalty is at
all time high
2
SUVs will
have more
competition
3
Discontinued
brands
create
opportunity
4
Luxury sales
outside from
non-luxury
households
5

20. Thank you!
Tom Libby
Automotive Loyalty Principal