One of the most critical financial benefits car companies have is the people who trade in those cars and buy the same brand again. The “churn” of customers means a manufacturer has to find new buyers. If that does not happen, sales fall. The brand Americans are least likely to buy when they replace their old car with a new one is much-maligned Fiat. Its brand loyalty is a dismal 10.4%. The brand is made by Fiat Chrysler Automobiles N.V. (NYSE: FCAU).
The J.D. Power 2020 U.S. Automotive Brand Loyalty Study is the gold standard of research about whether people will remain with the brands they currently own. Its calculations are based on transaction data from June 2019 through May 2020 and include all model years traded in.
Brands with high loyalty have very high replacement numbers. The figure for Subaru is 60.5%. It makes an inexpensive, reliable, sturdy four-wheel-drive car. Behind it in the rank is Toyota, followed by Honda. Ford is the highest-ranked among large American brands at 54.3%.
Fiat has been at the bottom of a number of car surveys on loyalty and quality. It is a wonder Fiat sells any cars in America at all. It barely does. In the second quarter of this year, it sold only 1,339, or about 15 per day.
The question for Fiat Chrysler is how expensive is it to support Fiat’s brand in America. Like almost all other car companies, it has to promote the cars, to some extent to help its dealers. That is, if the dealers want to be helped. Dealers may have to keep Fiat cars on their lots longer than they would like after they have been delivered.
Last year, U.S. News & World Report car experts wrote: “The 2019 Fiat 500 offers easy maneuverability and a user-friendly infotainment system, but its awful predicted reliability rating and tight, poor-quality cabin sink it toward the bottom of our subcompact car rankings.” Car and Driver gave it a grade of 4 out of 10.
It seems highly likely that Fiat Chrysler will no longer support the Fiat brand. The COVID-19 pandemic has chopped car unit sales in America. Certainly, poorly rated cars are likely to be affected substantially.
If Fiat leaves the United States, buyers probably will not be entirely stranded. Fiat Chrysler will maintain some service centers, and it will remain in the business of supplying parts. That won’t matter much. Fiat has a very low number of cars on the road. With a 10% loyalty rating, that will continue to drop sharply.
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Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
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