MNI China Car Purchase Indicator: Chinese Car Buying Sentiment Slips - Plans To Buy Bounce Back Despite Higher Expectations For Fuel Price

The continued recovery in oil prices and heightened uncertainty about the economy left Chinese consumer sentiment towards the car market lower in May, relinquishing all of the gains notched in the month before. The fall in sentiment didn’t deter potential buyers though with plans to buy a car rising to an 11 month high.
 
The MNI China Car Purchase Indicator, a composite indicator designed to gauge overall conditions in the car market, fell 5.6% to 91.5 in May from 96.9 in April. The fall in the indicator, which is made up of two components, was the result of higher expectations for fuel prices and a perceived deterioration in the current buying conditions for cars. As oil prices flirted with the $50 per barrel level, the Price of Gasoline Expectations component rose to 118.1, indicating that most consumers expect fuel costs to increase in the coming year.
 
The Car Purchase Expectations Component, a measure of consumer perceptions of the current car purchasing environment, declined 7.3% to 101.1 in May, although most of the decline was led by those in the 55-64 age group while the younger cohorts were relatively upbeat. Further detail in the report revealed that uncertain economic prospects have acted as a dampener, offsetting favourable pricing conditions as retailers compete for sales. Of those who thought it was a good time to buy, prices played the dominant role while income and government policy continued their upward trend among those who thought it was a bad time.
 
Last month, actual ownership and planned purchases decoupled from sentiment. This phenomenon continued in May with both car ownership and plans to buy a car increasing despite the bleaker outlook. 19.3% of respondents said they planned to buy a car in the next 12 months, up from 11.7% in the month before, leaving the percentage at the highest since June 2015. There was a less pronounced increase in the level of car ownership, with 38.1% of respondents saying their household currently owned a car, up slightly from 37.6% in the month before.
 
Of those planning to buy a car, the planned budget of Chinese families reverted to trend with April’s jump in the more expensive tiers reversing. Most households, at 32.5%, budgeted for a vehicle between CNY 100,000 – CNY 140,000 in May, which is broadly the ‘mid-range’. 27.1% said their budget was above CNY 200,000, down from 35.3% in April.