Of the 11 cities surveyed, Bengaluru, Indore and Mangalore have the strongest willingness to purchase vehicles.
On a day when carmakers unveiled their monthly sales figures, ZyFin Research’s Vehicle Purchase Sentiment Index showed the Reserve Bank of India’s (RBI’s) expected postponement of a rate cut is hindering a recovery. The ZyFin index has declined in November 2014 by 3.4 points to 21.0, after continuously suggesting an uptick since the start of the financial year. Concurrently, consumers have expressed a strong deterioration in their borrowing comfort, highlighting the urgency for softening in interest rates in boosting India’s aggregate demand. This decline comes despite a recovery in consumers’ outlook on employment and even inflation.
The Vehicle Purchase Sentiment Index reflects plans to purchase vehicles over the next six months. It is based on a monthly survey of 3,000 consumers in 11 cities across India, representing urban consumers. These are Ahmedabad, Bengaluru, Chennai, Delhi, Guwahati, Hyderabad, Indore, Mangalore, Kolkata, Lucknow and Mumbai. A score above 50 reflects optimism, while below 50 is an indication of pessimism.
“This sudden decline to an otherwise healing trend is a concern. Although consumers are gradually growing in confidence about the future state of the economy, they seem to be putting spending plans on hold due to high borrowing costs. Loan rates need to soften for consumer demand to get back on track,” said Debopam Chaudhuri, Chief Economist, ZyFin Research.
Key Highlights of the ZyFin Vehicle Purchase Sentiment Index for November 2014:
* The ZyFin Vehicle Purchase Sentiment Index has registered a score of 21.0 in November 2014, as compared to 24.1 in the previous month. Sentiment to purchase both two- and four-wheelers over the next six months has declined.
* Regionally, only the South showed improvement in willingness to purchase vehicles, as compared to the previous month. The index here improved to 32.3 in November 2014, from 30.1 in the previous month. The North and West severely lowered their sentiment, dropping to 15.0 and 25.5, respectively, as compared to 23.2 and 30.8 in the previous month. The score remains most depressed in the East, where the score dropped by 2.2 points to 4.4 in November.
* Of the 11 cities surveyed, Bengaluru, Indore and Mangalore have the strongest willingness to purchase vehicles. In Bengaluru, consumers are gradually lowering their pessimism toward vehicle purchase, driven by high expectations of overall economic conditions over the next 12 months and improved comfort on inflation. The index moved up marginally to 42.9 in November 2014, from 42.6 in the previous month. Consumers here have professed a greater interest in four-wheelers, rather than two-wheelers. Interestingly, the non-metro cities – Indore and Mangalore have a better outlook on vehicle purchase than many large metros. In the former, the index was at 39.5, on the back of the optimistic overall outlook of its consumers; the city also figures in the top three cities on overall spending. In Mangalore, where consumers have returned to an optimistic spending outlook after two months of pessimism, the index has improved to 38.9 from 36.6.