The shifting preferences of car buyers
The coronavirus disease 2019 (COVID-19) pandemic drastically altered the global economy, with the automotive industry experiencing significant disruptions.
For instance, the onset of the pandemic led to a sharp decline in new car sales. According to S&P Global Mobility, worldwide car sales dropped to 63.8 million in 2020. Factory shutdowns, supply chain interruptions, and decreased consumer spending contributed to a significant drop in automotive production and sales. In addition, the global chip shortage, caused by a lack of demand in 2020 during the pandemic followed by a sudden rebound in 2021, has made it harder for manufacturers to meet the new car demand.
Despite the challenges, the automotive industry has demonstrated resilience. In 2021, as restrictions eased and economies reopened, car sales began to climb. According to a report from S&P Global Mobility, the industry is still on track for a substantial recovery after the pandemic, with forecasts predicting 88.3 million new vehicle sales worldwide in 2024.
In the Philippines, the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) has set a sales target of 468,300 units for the year, representing a 9% increase from the previous year’s sales of 429,807 units.
According to Kantar, 63% of consumers actively seeking a new car are from Generation Z, while only 29% belong to the Baby Boomer generation. The trend highlights that younger consumers are more inclined to purchase vehicles; whereas many Boomers are satisfied with their current cars, with 61% expressing no desire to upgrade.
Meanwhile, younger consumers, particularly millennials and Gen Z, are more likely to prioritize technology and sustainability over conventional demographic factors, indicating a changing landscape in consumer preferences, where technological advancements and eco-friendliness are becoming more critical than age or income alone.
Consumers shift towards EVs
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Electric vehicles (EVs) are powered entirely or partially by electricity, utilizing an electric motor instead of an internal combustion engine. Because of the increasing challenges in fossil fuels and climate change, the adoption of electric vehicles is seen as a critical strategy for the transportation sector to reduce emissions and air pollution.
The United Nations Environment Programme (UNEP) emphasized that electric mobility can significantly lower greenhouse gas emissions, especially in light-duty vehicles, which represented nearly 50% of transport emissions in 2018.
According to the International Energy Agency, the global EV fleet consumed about 130 terawatt-hour (TWh) of electricity in 2023, displacing approximately 0.9 million barrels per day of oil consumption in 2023. To align with the Net Zero Emissions (NZE) scenario, EVs must displace around 8.2 million barrels per day by 2030.
With sustainability in mind, electric car sales reached 14 million units in 2023, accounting for 18% of total sales, from 4% in 2020. This growth trajectory indicates that EVs are becoming increasingly mainstream, with projections suggesting that by the end of 2024, electric car sales could account for around 17 million in sales or more than 20% year-on-year (YoY) increase.
The 2024 Deloitte Global Automotive Consumer Study reveals that a primary driver for consumers considering EVs is the potential for lower operating costs. In fact, many respondents indicated that the desire to reduce fuel expenses outweighs environmental concerns as a motivation for adopting electrified vehicles. In markets like India and Southeast Asia, approximately 63% and 68% of consumers, respectively, cited lower fuel costs as a key reason for their interest in EVs.
Similarly, Kantar reported 59% of car owners are interested in purchasing hybrid or electric vehicles for their next car, while 41% of first-time car buyers share the same interest.
Increasing focus on connected cars
A recent survey from McKinsey & Company revealed that car buyer preferences are increasingly focused on connectivity features, which are becoming essential for attracting customers in a competitive market.
The report stated that majority of consumers express a strong preference for vehicles equipped with advanced connectivity features. It is predicted that over 90% of vehicles sold by 2030 are expected to be connected, from the current 50%.
Many consumers are also open to changing automotive brands for better connectivity options. In Asia, 55% of respondents indicated they would switch brands for superior connectivity.
Furthermore, preferences for specific connectivity features vary significantly by region. For instance, consumers in Asia show a strong inclination towards advanced technologies, while customers from Europe and the United States favor comfort and convenience features. Urban populations are also more likely to consider connectivity features compared to their rural counterparts.
The impact of price
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Following the COVID-19 pandemic, the automotive market has experienced fluctuations in pricing, which have dramatically affected consumer purchasing patterns. In fact, vehicle prices remain above pre-pandemic levels.
According to Bankrate, a US-based consumer financial services company, the average price for a new vehicle was approximately US$47,936 in October 2023, a stark increase from around US$37,736 in March 2020. The price surge is also coupled with rising interest rates, which averaged 7.53% for new car loans, leading to an average monthly payment of $961 — over $200 more than pre-pandemic levels.
The Consumer Price Index (CPI) for used vehicles also reflects a 35% inflation rate since early 2020, indicating that consumers are facing higher costs across the board.
Moreover, Deloitte reported that consumers express hesitation about transitioning from internal combustion engines (ICE) to EVs due to price concerns. For example, a notable portion of consumers in developed markets, including the US and Germany, are still inclined towards ICE vehicles, primarily due to affordability issues.
Cars Commerce’s 2024 Industry Insight Report stated that the anticipated increase in vehicle production this year may produce a surplus of new cars, which could lead to greater discounts and incentives for buyers. The shift is expected to create a more competitive environment, allowing consumers to negotiate better deals.
Vehicles priced under $30,000 have seen a 63% increase in listings year over year, which indicates a shift in consumer preference towards budget-friendly options.
Social and psychological influence
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When it comes to gathering information for their purchase decisions, current car owners and non-owners exhibit contrasting behaviors, according to Kantar.
Existing car owners tend to rely more on traditional sources, particularly car dealerships, for information. In contrast, first-time buyers prioritize the experiences and recommendations of friends and family, indicating a shift towards social influence in the decision-making process.
On the other hand, the urgency of purchasing decisions varies significantly between current car owners and non-owners. Kantar’s research indicates that 68% of current car owners plan to buy a new vehicle within one to two years, reflecting a proactive approach to upgrading or replacing their vehicles. Conversely, only 42% of non-owners exhibit similar urgency, highlighting a more cautious approach among first-time buyers.
Meanwhile, customer perceived value is a significant determinant in the car purchasing process. It encompasses various attributes, including brand reputation, price, quality, design, utility, and technical considerations. However, the concept of value remains rooted in psychology, according to Harvard Business Review. — Mhicole A. Moral