"Interest Rates and Inflation Rise... Domestic Car Purchase Sentiment on a Declining Trend"

Monthly Report Publication of Korea Deloitte Group

[Asia Economy Reporter Oh Gyumin] Due to the spread of the global economic recession and the impact of interest rate hikes, the number of consumers postponing the purchase of high-priced items has increased, resulting in a decline in the intention to purchase vehicles throughout last year.

Deloitte Korea Group announced this while publishing a monthly report on the Vehicle Purchase Intent Index (VPI Index), which surveyed the vehicle purchase plans within six months of over 1,000 consumers from more than 18 countries including the United States, the United Kingdom, and Korea.

[Photo by Korea Deloitte Group]

The report analyzed the VPI index based on October 2021's VPI index (100), interpreting values above this as an 'increase' in purchase intent and values below as a 'decrease.'

For domestic consumers, the VPI index remained below the 90 mark for five consecutive months since July last year, indicating a decline in vehicle purchase intent. The factors cited for the decrease in purchase intent included ▲reduced disposable income due to rapid inflation ▲increased vehicle maintenance costs ▲rising auto loan interest rates (11% as of the second half of last year) ▲and increased use of shared mobility services.

In the second half of last year, the global consumers' VPI index, including Korea, showed a downward trend due to concerns over economic recession caused by persistent inflation and high-interest rate policies, supply chain issues, and increased uncertainty from geopolitical instability. Deloitte analyzed that this trend is likely to continue for the time being. The global consumer VPI index has been below 100 for five consecutive months since August last year and shows a gradual decline.

[Photo by Korea Deloitte Group]

Kim Taehwan, Automotive Industry Leader at Deloitte Korea Group, said, “As the global economy deteriorates, the VPI indices for Korean and global consumers continue to decline, which is expected to increase difficulties in the automobile sales market,” adding, “The automotive industry must specifically understand the changed consumer usage patterns and establish solid plans to prepare for this.”