This review is the second in a three-part series on
cannibalization and conquest rates of incremental models; the
initial review focused onincremental gasoline models, and the upcoming
final section will address the cannibalization rates of incremental
full electric models.
New hybrid electric vehicles continue to perform well in the US
market. Their combined market share (plug-in and full hybrids) has
risen to 12.3% through the first eight months of this year, up from
9.8% a year ago. Further, households with a hybrid in the garage
that return to market now are more loyal to the propulsion system:
their loyalty has jumped from 37% a year ago to 41.9% this
year.*
In this electric vehicle (EV)-focused market, hybrid vehicles
have resonated with the public because they usually offer
electrification without the substantial EV price premium or the
hassle of finding a charging station, as is the case with plug-in
hybrids.
Conquest rates
In addition to these consumer benefits, hybrid vehicles also
offer an “under-the-radar” benefit to manufacturers and brands:
they generally conquest customers from competing brands at a higher
rate than their gasoline-fueled counterparts (and higher conquests
imply lower internal cannibalization, something brands want to
avoid).
This finding, rarely mentioned, came to light in an S&P
Global Mobility analysis of the conquest patterns of 19 incremental
hybrid models and their gas-powered counterparts. (An incremental
hybrid model is a model with a hybrid propulsion system that is
added to a brand's product portfolio.)
Key findings from our analysis of 19 recently introduced hybrid
or plug-in hybrid electric vehicle (PHEV) models:
- Fourteen of the 19 hybrid models had higher conquest rates than
their gasoline counterparts in the same time period. - Ten models had gaps between their hybrid conquest rates and
gasoline conquest rates greater than 10 percentage points. - Six of the seven models (highlighted in yellow in Table 1,
below) with the greatest gaps are from Hyundai Motor Group, which
currently ranks third in the US market in retail market share; six
other entries are from Toyota Motor Corporation, the US retail
market share leader. - Three models with the greatest gaps, and five of the top six,
are in the Compact Utility segment.
Two of the five models with hybrid conquest rates lower than
their gasoline rates are Jeep Wrangler and Jeep Grand Cherokee. At
first, these results would appear to be counterintuitive, but a
closer look at the data reveals that these findings do not
necessarily reflect normal buying behavior. From spring 2023
through this past spring,
Stellantis restricted dealer stock to hybrid or electric
vehicles only for the 13 states with strict zero emission vehicle
(ZEV) regulations. Gas models were available only through special
order. This restriction inhibited and distorted natural market
forces, including inventory levels and retail demand.
Loan payments
The three remaining models with hybrid conquest rates that
trailed the rates of their gasoline counterparts — Audi Q5 E,
Lexus RX and the BMW XM — may be suffering from relatively high
prices. As shown in Table 2 below, the average monthly loan
payments for the XM and Q5 E were the highest and second highest,
respectively, among the 11 full hybrid models when comparing to
their gasoline counterparts. And the RX's average monthly loan
payment is the second highest among the 11 PHEVs when comparing to
the gasoline model, surpassed only by the RAV4 payment. Loans were
the preferred finance type by 34% of the customers for these three
models.
Lease payments
A review of data for leaseholders (who constitute 27% of
customers for these three models) reveals similar results for two
of these three models. As indicated below, a household migrating
from an X7 to an XM PHEV will experience a 138% increase in its
monthly payment, the third highest increase among the 13 PHEV
models. And RX gasoline owners migrating to either a full hybrid or
PHEV will have the greatest increase in their monthly payments
across all the models in these two categories. (See Table 3.)
Share of segment
It's also important to look at the impact of these incremental
hybrids on their shares of segment (shown in Table 4). Here, the
results are mixed. Of the six Toyota Motor Corporation models in
this group, four of them had greater year-over-year increases in
share of segment than the segments themselves. Several other
corporations' models, however, did not necessarily see gains
exceeding their respective segments. The Jeep Wrangler and the Jeep
Grand Cherokee not only had the greatest year-over-year declines in
retail registrations among the 19 models; they also had greater
declines in year-over-year registrations than the Jeep brand in
general. The previously mentioned ZEV-state program may have had
unintended consequences in buyer behavior beyond just conquest
rates.
In summary, while hybrids are popular and continue to benefit
those brands that offer them, a less obvious but equally important
advantage is their ability to attract households that already have
a competing brand in the garage.
Demo our loyalty analytics tool.
*For the purposes of this study, mild hybrids were
categorized as gas-only vehicles and are not included.
