As economic downturns spread globally and the impact of rising interest rates increases, consumers are postponing plans to purchase high-ticket items, leading to a decline in vehicle purchase intent in South Korea throughout last year.
Deloitte’s Korean group has published a monthly report on the Vehicle Purchase Intent Index based on a survey of over 1,000 consumers aged 18 and older across 24 countries, including the United States, the UK, and Korea, regarding their vehicle purchase plans within the next six months.
The report analyzed that if the VPI index (indexed at 100 in October 2021) exceeds this level, consumer intent to purchase vehicles increases, while a drop indicates a decrease. In the second half of 2022, global consumers’ VPI index, including Korea, fell due to concerns about economic downturn stemming from persistent inflation and high-interest policies, supply chain issues, and increased uncertainty due to geopolitical instability. Deloitte Global predicted that such trends are likely to continue for the foreseeable future.
South Korean consumers exhibited fluctuating automotive purchasing sentiment from December 2021 to the first half of 2022. The VPI index recorded 107.2 in December 2021, followed by 92.4 (January 2022), 114.9 (February), 96.7 (March), 111.0 (April), 93.5 (May), and 99.5 (June), maintaining levels near 100 despite declines.
However, the situation changed in the second half of 2022. After reaching 119.3 in July, it dropped to 86.8 (August), then further down to 69.5 (September) and 63.7 (October). While it bounced back to 86.5 (November), it fell again to 70.5 (December). The VPI index recorded below 90 for five consecutive months after July, indicating a low vehicle purchase intent in the domestic market in the latter half of last year.
Factors contributing to the decline in purchase intent include the following: ▲Reduction in disposable income due to rapid inflation ▲Increased burden of vehicle maintenance costs ▲Rising auto loan interest rates (11% for the second half of 2022) ▲Increased usage of shared mobility services.
The global consumer VPI index has also remained below 100 for five consecutive months since August last year, demonstrating a gradual decline. However, the VPI index saw a slight increase in the last two months (October: 77.7; November: 82.8; December: 84.8). Nevertheless, the overall VPI index for 2022 indicates a slowdown in demand.
In analyzing the factors concerning global consumers’ purchasing concerns, similar to South Korean consumers, 45% cited postponing plans to purchase high-ticket items and worrying about depleting current savings. Furthermore, the automotive purchase intent index globally continues to demonstrate signs of decrease due to semiconductor and parts supply issues, inflation, and high-interest rates.
Kim Tae-hwan, leader of the automotive industry for Deloitte Korea, stated, “As the global economy deteriorates, the VPI indices for consumers in Korea and worldwide are expected to decline continuously, causing greater challenges in the automotive sales market,” and emphasized that “The automotive industry must gain a concrete understanding of changing consumer usage patterns and prepare robust plans to address this.”
Lee Sang-jin daedusj@autodiary.kr