Tesla has the highest customer retention, and the industry should worry

Tesla has the highest customer retention rate, and the industry should worry because they will have issues getting EV buyers back.

S&P Global released an interesting new research paper about “nomad” car buyers, which are described as people who buy a car brand for the first time and return to the market after:

Most automotive customers who are new to a brand often leave for yet another brand when they return to market. In fact, more than half of these “Nomads” make a habit of it.

The report also describes a subset of nomads called “one and done”:

Nomads who own a brand once and leave are also known as ‘One and Done’ – about 58 percent of Nomads left their brand in the 12 months ending July 2022. That’s the highest ‘One and Done’ rate (defection rate of Nomads) in at least 10 years, according to data analysis by S&P Global Mobility.

In the paper looking at how these buyers are reacting to the current market, S&P Global found a clear leader: Tesla.

Obviously, as a newer brand, Tesla would have more first-time owner, but it’s its ability to retain those owners that is so impressive:

While Tesla’s high share of first-time owners (83%) isn’t too surprising, their ability to keep those new customers is extraordinary. Tesla’s ‘One and Done’ rate is just 39% compared to 58% for the industry (remember, a lower number is better in this case). The next-best ‘One and Done’ rate goes to Ford at 50%. However, Nomad share of Ford’s return-to-market households in less than half of Tesla’s.

Tesla dominates loyalty metrics for this important nomad segment of car buyers according to the study:

Tesla has previously topped the list of the most satisfied customers in the auto industry and has proven to lead in customer retention – not just for nomad buyers.

City Dwellers’s Take

The rest of the auto industry should really take note here. Tesla is far from perfect and it has issues, but there are quite a few aspects to Tesla’s products and business that will make it hard for customers to go back to other brands.

I am talking about things like the Supercharger network, the user interface, the frequent new features through software updates, and the direct-to-consumer sales, rather than going through third-party franchise dealers.

This should be an important concern to other brands because at the same time, Tesla is delivering electric vehicles in higher volumes than anybody else – conquering the EV buyers en masse.

The combination of volume and brand loyalty is going to make it hard for other brands to take buyers away from Tesla when they are themselves ready to deliver electric vehicles in volume, which is still a few years away for most major automakers.

Many industry analysts are having issues understanding how Tesla can believe it can deliver 20 million vehicles per year starting in 2030, but if this trend continues, I can definitely see it happening.