Sales intent in February 2023, according to Deloitte’s latest Vehicle Purchase Intent index (VPI) report, remained on a downward slope, but there are still positives in the index.
The VPI index has declined from the base of 100 on 27 October 2021 to 88.3 index points on 1 February 2023.
Deloitte said a number of key factors were influencing the VPI index trend.
Positive factors included:
- Improving supply of new vehicles as the semiconductor crisis continues to ease.
- Vehicle prices are stabilising.
- Underlying pent-up demand created by prolonged inventory shortages.
- Increasing consumer interest in newer technologies, including electric vehicles (EVs), motivated by a strong desire to lower fuel costs.
- Ageing vehicle fleet requiring renewal.
The negative factors that influenced the index were:
- Consumer concern over the inflationary environment and total cost of ownership, which elevated the risk of demand destruction.
- Lack of affordable vehicle options at the lower end of the market as many original equipment manufacturers (OEMs) have raised entry-level segment pricing.
- Lingering impact of stock shortages in elevated transaction price environment for both new and used vehicles.
- Geopolitical instability, trade tensions and global supply chain disruptions affecting input costs.
The Deloitte VPI index is a measure of forward vehicle demand intent calculated and based on the percentage of consumers who plan to acquire a new or used vehicle in the next six months.
A vehicle for the purposes of the VPI is defined as a car, sport utility vehicle (SUV) or multi-purpose vehicle (MPV) or pick-up truck, including new and used vehicles.
Deloitte said the top three drivers of purchase intent among consumers were that:
- 23% of respondents indicated that new vehicles on the market have features they want now.
- 22% confirmed they were just ready to drive something different.
- 15% reported that their current vehicle was not worth the cost of maintaining it anymore.
It added that 41% of respondents showed an intent to purchase an EV, which includes full battery electric and hybrid vehicles.
However, consumers showed varying levels of concern for various issues.
- 24% of consumers were concerned about making upcoming payments.
- 68% were concerned about the money they have saved up.
- 39% of consumers were concerned about the credit card debt they were carrying.
- 51% of consumers were delaying large purchases.
Ravin Sanjith, the Africa Automotive Sector Leader at Deloitte, said that among the myriad of COVID-19 headwinds in our lives, was the disruption to the entire mobility mindset of consumers as evident in the VPI index.
Sanjith highlighted that the purchase of a new vehicle was second only to the purchase of a home, not only in South Africa, but globally as well.
“The index indicates an increasing number of consumers are delaying large purchases correlating to the prevalence of turbulent economies across the globe.
“Most people are either choosing or obligated to prioritise savings to sustain a standard of living, which not even the enticing smell of a new car can compete with.
“However, new and emerging technological features, as well as the promise of reduced operating costs from innovations such as Electric Vehicles (EVs), is attracting a different buying rationale and may be the antidote to a declining VPI,” he said.