MNI China Car Purchase Indicator: Fall In Gas Price Expectations Buoys Chinese Sentiment Toward Car Market - Plans To Buy Fall Further On Budget Constraints

An expectation of cheaper fuel prices pushed overall consumer confidence towards the auto market higher in February, although concerns about future household finances meant that purchase expectations and budget fell back.
 
The MNI China Car Purchase Indicator, a composite indicator designed to gauge overall conditions in the car market, rose 1.1% to 88.2 in February, the highest since October last year. The dynamics of the increase show that conditions remain supported by expectations of lower fuel prices, while consumers are wary of making outlays on durable goods. The Car Purchase Expectations Component fell 0.7% to 97.5 in February, with prices being nominated as the main reason for it being a bad time to buy. The Price of Gasoline Component fell 2.2% to 121.1.
 
Consistent with the fall in sentiment towards the car buying environment, plans to buy a car were further reduced in February with 16.1% of respondents nominating that they planned to buy a car in the next 12 months, down from 16.5% in January. After trending upwards since early in Q2 2014, planned auto expenditure has flattened over the last few months, indicating that car sales may struggle to maintain momentum over the medium term. Car ownership levels also fell back in February. Following a surge in January, 42.5% of respondents reported that their household owned a vehicle in February, down from 51.6% in the month prior and more in line with December 2015’s result of 42.1%.
 
With consumers exhibiting renewed uncertainty over economic prospects, and a pickup in price as the main factor considered when choosing a vehicle to buy, there was a shift towards thrift in budget preferences in February. The middle budget ranges, which had been gaining in popularity over the last year, fell somewhat out of favour to make way for a surge in popularity among the cheapest options. A combined total of 29.8% of respondents who were planning on buying a car in the coming year had a budget of less than CNY 80,000. The middle ranges, which span CNY 80,000 – CNY 140,000 still accounted for the majority of responses with 42% while 27.8% said their budget was more than CNY 140,000.