The best-selling Model Y is a favored
next stop from the rest of the lineup, but until Elon Musk’s
automaker enters new segments – such as Cybertruck – the compact
SUV might be a final destination.

For a relatively new brand, Tesla is already
building world-class loyalty numbers. Winner of S&P Global
Mobility’s 2022 Automotive Loyalty Awards for Overall Loyalty to
Make, Most Improved Make Loyalty, Alternative Powertrain Loyalty to
Make, and Ethnic Market Loyalty to Make, Tesla has not only
demonstrated strong appeal to new buyers but a compelling ability
to retain existing ones. But where do Tesla owners go when they buy
their next vehicle?

A whopping 59.9% of all Tesla Model S large
sedan owners replace their cars with another Tesla, based on the
most-current rolling-12-month data through June 2023. When it comes
to the compact Model 3 sedan, the number is even higher: 72.8%.

When a Model 3 sedan owner purchases a new
vehicle, the most common choice is to acquire a Tesla Model Y
crossover. Over the last 12 months, 40.3% of Tesla Model 3 that
returned to market for a new vehicle switched to a Model Y
crossover SUV, according to S&P Global Mobility analysis.
Meanwhile, 26.1% went for another Model 3.

“Tesla is very successful at migrating
customers from a Model 3 to a Model Y, which contributes to high
loyalty rates,” said Kent Chiu, associate director of consulting
services at S&P Global Mobility. “Tesla has taken advantage of
the industry’s shift toward CUVs. By putting the Model 3 to market
first, followed by the Model Y shortly after, it gave customers a
path to migrate through the portfolio.”

Tesla also has done well to convert Model 3
households into advocates for electric vehicles in general – with
78.9% of Model 3 households staying loyal to the battery-electric
fuel type – most of them moving to the Model Y.

As for the hot-selling Model Y, it has the
highest model loyalty rate, at 37.3%, among electric compact
utility vehicles with return-to-market volumes greater than 1,000.
The Ford Mustang Mach-E is second at 18.5%.

Photo courtesy of Tesla Motors

But whereas the Model 3 succeeds in loyalty by
moving owners to the Model Y, Tesla’s compact crossover may be the
end of the road for many households, because the price jump to a
Model S or X is so significant, Chiu said. About 70.5% of Model Y
households acquire another EV. And while that is a strong rate,
it’s lower than the Model 3. Those households seeking another
vehicle after the Model Y often are looking at internal-combustion
SUVs or trucks – a defection Tesla hopes to remedy with its
oft-delayed Cybertruck.

And what about the original, long-in-the-tooth,
Model S? While 21.7% of owners return to another Model S, a
significant 18.6% of former Model S owners also choose to go for a
Model Y. “Migration can be downsizing as well,” Chiu said. “Some
Model S and X households are downsizing to a Model 3 or Model Y as
replacement vehicles.”

About 11.7% of Model S owners go for a Model X
SUV for their next car, while 7.9% step down to the Model 3,
resulting again in a total 59.9% loyalty rate.

Tesla’s product portfolio has its limits, so
when owners leave, it tends to be for a vehicle-type that Elon Musk
doesn’t (yet) offer. An increasing number of luxurious EVs from
established brands are hitting the market, wooing some early EV
adopters away.

When it comes to the Model S, the most popular
non-Tesla replacement is led by the Lucid Air at 3.4%, followed by
the Rivian R1T at 1.8%, Mercedes-Benz EQS at 1.6% and Rivian R1S at
1.2% All are fresher to market than Tesla’s aging Model S, which
was introduced in 2012.

“Historically, as a vehicle ages, the loyalty
rates decline. And each time there is a facelift, refresh, or
redesign, loyalty increases. So the defection to Mercedes-Benz,
Porsche, and Lucid is consistent with that pattern,” Chiu said.

The Rivian R1T also factors as the most popular
non-Tesla for those replacing a Model 3 or a Model Y, at 1.3% and
2.1%, respectively.

Tesla’s Cybertruck was unveiled in 2019 and
originally intended to enter production in 2021. Since then, Rivian
released its R1T pickup and R1S SUV, while Ford released the F-150
Lightning, which will soon be joined by the Chevrolet Silverado EV
and the electric Ram 1500 REV.

Add in future brands like the all-electric
Scout, and the electric pick-up segment is already beginning to
look crowded.

As such, Cybertruck is vital to keeping Tesla
fans within the brand, along with other products to expand the
portfolio, Chiu said: “The Cybertruck, a second-gen Roadster, and a
vehicle positioned below the Model 3 all have been promised, and
should migrate existing Tesla owners up or perhaps sideways within
the brand. Now Tesla needs to get them to market.”

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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• Source: http://www.spglobal.com/mobility/en/research-analysis/what-do-tesla-owners-buy-when-they-return-to-market.html