Perhaps it’s my Texas bias showing, but my assumption is always that pickup truck buyers are the most loyal segment in the car buying universe. They are not. Presumably, then, it’s the few people left who buy sedans? Again, not even close. Crossover buyers are about 50% more loyal than truck buyers and twice as loyal sedan buyers. That crossover buyers stick with their cars isn’t super surprising, though the extent of their loyalty certainly is. It gets even weirder when you look at what they buy next.
We’re going on a journey today, folks, through the mind of the average American buyer. We’re going to find out that, in fact, people aren’t just buying the largest thing they can get! While we’re at it, we’ll also look at Hyundai’s big investment plans, the craziness of the oil markets, and a Porsche recall that impacts at least one Autopian member.
Let’s do this.
Crossover Buyers Want Any Crossover Other Than The One They Own
Ok, look at this graphic below because it’s kind of interesting and is the basis for our big conversation today. It comes via market research firm S&P Global (you can read the mini-report here), which is a company that people in the auto industry pay a lot of money to understand what’s actually happening with cars. Up at the top we’ve got the overall trend of segment loyalty to the “utility” body style, which includes everything from Tesla Model Ys up to Range Rovers. On the lower half we’ve got loyalty to four major subsegments that make up the bulk of the utility market. Notice something weird?
People who buy utility vehicles keep buying utility vehicles. This graphic comes points out that the utility loyalty was 73% in Q1 of 2023, i.e., people who bought a crossover/utility bought another crossover/utility, even if it’s not the same brand or model. That’s a record high and shows that, basically 3-out-of-4 utility buyers are going back to the well. Compare that to trucks (48.8%) and sedans (35.6%) and you can see how massive a difference there is.
Where it gets weird is when you look at that lower half, which shows that compact (think HR-V or Model Y) and upper mid-size utility owners (think Tellurides or GV80s) are not going back to their same classes at the same rate. In none of these extremely popular categories does any segment even reach 50%.
What’s happening here? My guess is that there are three key factors and show that car buyers in the United States are potentially a little smarter than some give them credit for.
Factor 1: People Bought What They Could Find
It’s been hard to buy cars, especially with limited supplies. Assuming you have a BMW X3 and really want a new car and the X3 you’d like to replace it with isn’t available, maybe you’d be willing to look at a Kia Sorento. Data over the last three years on car buying preference is always going to be clouded by supply constraints.
Factor 2: Crossovers Are Where The Most Choice Is
Automakers like Ford and GM are decreasing their sedan choices and rapidly expanding their crossover and utility options. Saying “more people buy crossovers” is perhaps a little misleading when, frankly, every car is a crossover these days. If you’ve got two kids and a dog you could definitely get a sedan or a four-door pickup. People do that. However, if your family expands it’s not a leap to see you jumping from a Crosstrek to an Ascent. Crossovers make a lot of sense for a lot of people.
Factor 3: Crossovers Give People A Chance To Downsize
Probably the most important data in this graphic is the fact that compact utility vehicles and compact luxury utility vehicles both represent the most loyal part of the market. In fact, from Q4 2021 to Q4 2022, both upper mid size luxury utility and upper mid size utility buyers saw declines in loyalty while compact luxury buyers went the other direction (and regular compact buyers stayed more loyal than everyone else). For much of our history, more money meant buying as much car as you possibly could, but buyers seem to be rationalizing more and “right sizing” as opposed to “super sizing” their car choices. I’d like to see more data to confirm people aren’t just going out and buying Escalades, but even within these four categories the changes are obvious.
This is all good news, actually, because the efficiency of gas vehicles is going up and people are buying more efficient vehicles. The consumption of oil relative to GPD (this is called oil intensity) has steadily decreased over time, reducing our dependence on the stuff.
Did OPEC+ Blow It Or Did The Biden Admin?
Speaking of oil, last week, OPEC+ (the group of 23 countries that produce oil led by Saudi Arabia which is, basically, a price-fixing cartel) decided to surprise the world by announcing a cut in oil production by 500,000-1 million barrels per day. Why did this happen? Certainly, a move like this causes the price of oil to go up. It also created a bit of a short squeeze according to Reuters, meaning people who were short (i.e., betting on price decreases) were forced to buy futures (i.e. agreeing to buy oil contracts that have to be fulfilled at a future date) to cover their positions:
With its surprise announcement, OPEC+ successfully squeezed the shorts in crude petroleum, with bearish positions reduced to the lowest for 11 weeks since late January.
Since March 21, funds have purchased a total of 174 million barrels of crude, the fastest rate since December 2019 and before that September 2017.
Was this smart? The sudden rise in gas prices in the last couple of years led President Biden to release fuel from the Strategic Petroleum Reserves (America’s big pot of backup oil) to push prices down. Now that those reserves have been reduced, in theory, it means that oil producers are in a better position to threaten the global energy economy and drive prices up. That’s the premise of this Forbes piece entitled “OPEC Is Back In The Driver’s Seat.”
These events highlight the risks of using the SPR for purposes other than emergency. Last year’s price rise was politically problematic, but it wasn’t a real emergency. But now that the SPR is substantially depleted, OPEC has been given far more pricing power than it had a year ago.
The U.S. can’t respond to the OPEC cuts in the short term, which means that oil prices in the intermediate future will be dictated by OPEC’s decisions. That is a consequence of last year’s decision to deplete the SPR.
Perhaps. But is this short-sighted? My favorite energy economist is a guy named Philip Verleger and, to be honest, he comes off as a nut sometimes. Still, he’s my kind of nut, and his instincts over the last decade have been pretty good. He’s got a paper out that says the opposite.
In this paper, Verleger says a bunch of stuff about how energy journalists are in the pocket of Saudi Arabia and calls Crown Prince Mohammed bin Salman a tyrant, which I’m not gonna touch. He also thinks the Crown Prince is mad that Biden basically took $100 billion from Saudi coffers through the SPR release. Maybe!
Here’s the key bit from his paper, however:
The organization’s decision is also a stupid mistake. The global financial system is facing contagion. Central banks are under pressure to cut rates. At the same time, the European Central Bank has warned that core inflation is far too high. The increase in consumer prices that follows OPEC’s output reduction will force central banks to boost interest rates higher. Banks will cut lending as more depositors move their cash to money market funds, which, in turn, will engage in reverse repos with the Federal Reserve. The likelihood of a severe recession has increased.
You know what’s good for oil producers? Oil consumption. While GDP and oil production have started to diverge as cars become more efficient and electric, net consumption still tends to improve as economies warm up. Risking that at a time when banks are considering lowering interest rates to spur growth is short-sighted. Again, more from Verleger here:
OPEC’s stupid action should be welcomed by those who want a rapid transition away from fossil fuels. Two tyrants, MBS and Vladimir Putin, have united in an effort to boost their income from fossil fuels. Putin led by cutting gas supplies to Europe, expecting a quick capitulation. Instead, Europe has since ended its reliance on Russian gas. Russia’s economy will be decimated, frustrating the dream he postulated in his doctoral thesis for St. Petersburg State Mining University. The Saudi action will have a similar effect on the oil market unless other oil exporters realize that MBS is hastening the stranding of a large part of the world’s fossil fuel reserves.
I think we’re a long way from stranding the Saudis, for various reasons, but it does make the Biden Administration’s approval of that Alaska oil project make a lot more sense, doesn’t it?
Hyundai’s Gotta Spend Some Money In Korea
While the Inflation Reduction Act has encouraged the production of electric cars in North America, non-American automakers (and American automakers, actually) still have to build cars elsewhere. In particular, Hyundai and Kia have to make it rain won (their currency) in their home market.
Hyundai Motor Group said on Tuesday it planned to invest 24 trillion won ($18.14 billion) in South Korea’s electric vehicle (EV) industry through 2030, bolstering its presence in a segment that is set to dominate long-term global automotive demand.
The investment plan by the group, which includes Hyundai Motor Co (005380.KS), Kia Corp (000270.KS) and Hyundai Mobis Co Ltd (012330.KS), came as President Yoon Suk Yeol attended a groundbreaking ceremony for Kia’s first designated electric vehicle plant.
Neat!
Attention Doug DeMuro
Autopian Member in good-standing Doug DeMuro, please note: Your car was maybe recalled?
This was first noted by Car And Driver, which pointed out that 489 cars out of about 1,300 made were being recalled. What’s going on here?
Porsche issued a recall for 489 Carrera GTs over an issue with the suspension components, which could increase the risk of a crash. According to a recent filing with the National Highway Traffic Safety Administration (NHTSA), the spherical joints that connect the wishbone suspension components on the front and rear axles can fail due to damage from mechanical stress and corrosion.
“The material used does not provide sufficient resistance to inter granular stress corrosion when exposed to salt and mechanical stress over service life,” Porsche’s defect notice reads. “This could result in cracks or fractures in the spherical joints, and possible [sic] the wishbone.”
The good news is, Porsche will let you borrow a suitable vehicle in the interim. I recommend a Dakar.
Are You Segment Loyal?
Are you going to buy a car that looks basically like your car? Or are you going to buy something else?
Photos: Hyundai, S&P Global
Regarding OPEC… It’s a bit early to call what OPEC is doing ‘stupid’. For one thing, there are many that are predicting that a recession is coming. And you know what happens in recessions? Decreased oil consumption.
And in my view, higher oil prices are better for all of us in the long run as it encourages us to use it more efficiently. Plus on a net basis, high oil prices are also a big benefit for countries like Canada and the USA… both of which make lots of money extracting oil
“Am I segment loyal?”
I’d say I’m semi-loyal at best. Basically what I want is a 4 door hatchback/wagon that isn’t too expensive to run.
So prior to my Honda Fit, I’ve had a Suzuki Aerio, couple of Focii wagons, a Saab 9-3, a Civic Wagovan, an Escort hatchback, an Escort wagon, a PT Cruiser and a Festiva.
Aside from the Festiva, all these had 4 doors and decent sized cargo areas that fit surprisingly large things. And all had manual transmissions.
But in terms of ‘segments’, my vehicles have covered the ‘subcompact’, ‘Compact’, wagon and the near-luxury segments.
And for my next vehicle purchase, I’m considering a used Tesla Model S… which is considered to be a ‘Large Luxury Vehicle’… but to me it’s still a hatchback that just happens to somewhat larger than other vehicles I’ve owned. I would also consider a Ford C-Max hybrid, a Prius or another Honda Fit.
I think all of those are considered to be in different “segments”. But they’re all practical and efficient hatchbacks/wagons to me where I won’t get hosed if fuel prices spike up.
So really, I’m more loyal to a minimum level of practicality and efficiency than an actual defined segment… without being too big as I live in the city and sometimes have to deal with tight parking.
And when I imagine my perfect car, it would basically be a Focus Wagon, but with a Tesla Model 3 RWD platform/tech… which would include access to the Tesla Supercharger network.
Mach E?
Amazing to hear that someone is cross shopping a Fit and a Model S! My solution to finding an interesting four-door hatchback or compact wagon is to buy JDM imports, but I also don’t have to drive much since I commute by train.
I would love to be segment loyal, but there is no ‘basic small car’ segment anymore except the Mitsu Mirage, and that’s it :/
Every so often I see a new-looking Kia Rio 5 (or maybe Spectra5, I cannot remember) but I don’t know if they’re still available.
The advantage I see with CUV is a lot less people want to borrow my vehicle vs when I had my truck.
Am I segment loyal? Let’s see:
Dodge Dakota 4×4
Chevy S-10
Chevy Silverado LT Z71
Dodge 2500 4×4
Ford Ranger Sport
Nope. Not at all.
I have only driven crossovers since 2002. But i still drive the crossover i bought in 2002. Am i loyal or am i cheap? I tell you this i love this car but if it died and i couldnt get the same crossover as a replacement i wouldnt buy another. It would be a pale replacement. Maybe a Hatch or Wagon. No
I try to be segment loyal, but my segments keep disappearing or nearly enough so to the insatiable wendigo of the matryoshka clone segment. Wagons, hatches, hot hatches, now I’m on a RWD manual hardtop sports car knowing it’s likely the last of its kind.
As much as I would love to buy another Yaris IA/Mazda 2 when it comes time to replace my current one, I probably won’ t be able to unless Mazda starts selling the Mazda 2 in the US or Toyota brings back the Yaris IA. I really don’t see either one happen.
Now if my Yaris IA last for another 18 years, it would be 25 years old. If I could find a 25 year old Mazda 2 with 60,000 to 70,000 in Canada or Mexico to import at that time, I would be very tempted to import it.
I keep coming back to vans. Arguably the most logical of compromises in a vehicle used for things and stuff.
So people are buying CUVs, not really enjoying what they bought and going for any other model than the one they have. Is that the gist? Maybe it isn’t loyalty, but people trying to make a CUV fit their lifestyle and it not really fitting their needs?
Kind of like me with fish. I hate fish and tell people that all the time, but people keep telling me that I haven’t had “x” type of fish, or that is wasn’t cooked correctly. They are so persuasive in their argument and I really want to like fish and I try to eat it the way they suggest only to find it still sucks. I’ve been doing this for over 40 years. It doesn’t mean I’m loyal to fish. On the contrary, I’m just trying to will myself to like something that I actually hate.
I don’t want to walk with a cane or wear diapers, but I have to accept that at some point in my life I will probably have to.
“The new Toyota RAV4: A fate you begrudgingly accept”
I also dislike fish, but I like Phish and Fishbone.
I’ll be eating your portion of fish!
I think it’s almost the opposite—once resigning themselves to or never enjoying driving enough to care in the first place and buying these jack-of-all-trades, they don’t want to go back to a vehicle that’s more compromised for daily drudgery. The disloyalty on the far ends is likely down to demographics. Those buying the small ones (which are often deceptively smaller inside than they even look) are probably younger and not making as much money, then they have a kid(s) and start getting promoted, so they move up in size. On the other end, the people with the 3 kids in hockey who wanted the giant monstrosity to accommodate them, get the kids off to college and find they no longer need the space and maybe they don’t tow the boat up to the camp anymore and they become more aware of how it’s a PITA to maneuver the thing around—especially as they’re getting older—and they probably don’t love the bill every time they get fuel (even though they have money, that doesn’t mean they like spending it on fuel), but they don’t want to lose the daily utility and a space in the back for the dog(s), so they just drop down a size or two.
How are you on shrimp? If you wanna give those a shot I might know a guy with a wheelbarrow full of room temperature but possibly, maybe still not too toxic shrimp.
It’s kinda like eating fugu but a LOT cheaper!
I understand you completely, but I bristle at the notion of comparing fish (delicious!) with CUVs (gross!). Perhaps you should try my salt-baked branzino?
If anyone made wagons anymore, I would probably be loyal to the wagon segment? Since that’s not an option I’ve moved on the vans. But my plan is to daily that for years until the kids are older, then buy something more fun for a daily whilst keeping the van for utility purposes.
A life can change an awful lot between car purchases. I wouldn’t expect many people to stick to the same segment, unless they lease or change vehicles all the time.
Save the wagons
Your OPEC evaluation is better than any business evaluation done in the last year combined at the old lighting site. Great job!
Generally I look at Sedans. Though every once it awhile I go off the path. It depends on what I need. Need a general purpose people hauler with a bit more cargo, Crossover.
Right now I am looking a car completely off my path as I want to.
If you look at my history, I am not segment loyal. Sedan, coupe, pickup, SUV, hatchback, pickup, sedan, sedan. I’m on the Maverick waitlist, so next is pickup in terms of new car purchases whenever that happens. I got down to 1 car last year for the first time since 1997, though I should say for most of that, car 2 was a non-running project. I don’t like having only one car, so I’m looking at the used market for something fun as a 2nd vehicle and it’s probably going to be a coupe.
Is going from a midsize crossover to a slightly larger crossover-thats-really-a-wagon (Flex) segment disloyalty?
Is it really buyer loyalty or is it just the glut of availability?
I mean, if you toss a lawn dart in the air chances are it’s gonna stick in the ground.
Well, I’ve owned probably a dozen XJ cherokees so pretty loyal to those, currently looking for a back up rhd one. I’ve also owned 5 Spitfires and would really like to find another mark 1 or 2. Oh, you are talking about new cars? Not interested.
Ohh there’s a 2001 Jeep Cherokee Sport 4.0 for sale near me. Want.
Unless it has had the head changed to the earlier style and is a really good deal, 2000-2001s are the ones with the most issues.
Recent changes in DT’s garage makes me take what you say with a grain of salt. 🙂
Lol, I don’t have the means of DT, times have been kinda tough around here. Unless the autopian wants to hire and autistic mailman, but I’m not leaving Kansas for California.
The crossover segment offers hot hatches, wagons, SUVs, and minivans without the sliding door. It’s kind of unfair to lump crossovers together into one massive segment. Which bears out in the difference within size classes there. People are not necessarily staying in the hot hatch crossover or the SUV crossover, but moving to something else stays within the crossover category.
Every car with a lift is not a crossover.
Once upon a time, yeah I would probably be loyal to a segment. These days? I’ll take what fits my budget and my needs. If that means going from a full-size sedan to a wagon or a hatch, that’s where I’ll go.
We’re not segment loyal. I went from a midsized wagon to a compact wagon to a full size sedan to a compact sedan. My next purchase will probably be a 3 row vehicle. Preferably an electric vehicle of some sort. My better half went from a compact wagon to a subcompact hatch to a compact CUV. Whatever fits our needs best we get. And try to keep for a while since I have better things to spend money on these days than all the various taxes and fees NY tacks onto any car purchase.
I’m loyal to the general size of my cars (compact), but not necessarily the body style. I have a sedan because that’s the only style the Civic Si comes in right now, but I sorta miss my hatchback. They’re basically the same to me though.
I also prefer my vehicles compact. It allows me to cram more cars in the same driveway area. My largest, most opulently roomy car is a WRX. It is also the most efficient in the fleet. Mostly because it has that fancy new ‘fuel injection’ instead of a carburetor.
I am segment loyal to not driving a Pickup truck or SUV as a daily.
I have a manual M3 on order to replace my 2020 330i daily, so in this instance I’m most definitely loyal.
I’m not too segment loyal, but we did always have a family hauling SUV in the family for a lot of years. Now that 2 kids are in college and we just have 1 high-school age kid left at home, we can downsize a bit (the car size, but unfortunately not the quantity of cars). The current fleet has a lot of variety, but the variety works well (2 seat convertible, a 6-passenger AWD SUV, a half-ton truck, and an aging luxury sedan.) I try to think about or needs anytime we are getting something different. We are adding a PHEV sport/luxury sedan to the family tomorrow so that the SUV can go up to the often snowy UP of Michigan for my son at college. The higher ground clearance of the SUV and ability to move his stuff between college and home will work well for him. The truck spends about 10-15% of it’s miles hauling a camper. I’m looking forward to having a PHEV again. I miss a lot about the 1st gen Volt we had and I’m really looking forward to being able to plug in again and having a car that’s great for short trips (grocery runs, food pick-up, school drop-offs and pick-ups, etc.).
I WAS segment loyal – only bought compact hatchbacks – but now that fewer and fewer are available – we’ve got what, the Toyota Corolla? – I don’t think I actually can be. And given the poor knee room of crossovers combined with the overall dreariness of the category I’m finding it very limiting when I consider what I could get next.
Hopefully my current hatch survives for a while.
I’m kind of in the same boat. I really like compace hatches too and would like to replace my 2011 XB with a similar (non-luxury, non-CUV) PHEV vehicle, which leaves me… The Kia Niro? I’m really hard pressed to think of anything else…
I’m hoping mine holds on for a while and hoping the market segment gets some more offerings in the next few years…
The Kia souls seems more akin to the XB, they still sell those. Mazda 3 also seems to fit your bill.
It’s that PHEV part that is the problem… TBH, I actually like the XB and going to a plug-in hybrid would be the biggest reason I’d want to upgrade.
I’m actually a really good case for a PHEV in that I have a garage with adequate power, I have solar on my home, and my daily commute is about 30 miles round trip.
Civic hatch, Impreza, Mazda 3 too – so there’s a few holdouts.
Funny you mention knee room, that’s a complaint of mine with my GTI – I’m not a tall person, but my knees feel close to the steering column most of the time, my right knee rests against the center stack the rest of the time. I’d say it’s in part because it’s a manual so I sit closer than I might with an auto, though.
Knee room is a huge complaint of mine! Even big vehicles are often cramped thanks to the obtrusive Hummer H1 center consoles. Funny thing is that other than the damn start button which I can at least find a seat position to work around, the GR86 is just about the roomiest car I’ve been in for my knees other than an F-150 in almost 20 years.
Occasional reminder that different amounts of money don’t mean the same things to different people. $100 million is quite literally a rounding error in the record $161.1 billion in net income that Saudi Arabia made on oil in 2022. In my field this is known as “decimal dust.”
So no, Mr. Verlager, the Crown Prince is not mad that Biden basically took $100 million from Saudi coffers through the SPR release.
https://www.cnbc.com/2023/03/12/saudi-oil-giant-aramco-posts-record-161point1-billion-profit-for-2022.html
Sorry, to clarify, the number is $100 Billion with a B not an M.