Are more Singaporeans buying cars and motorcycles because of Covid?

Despite World-Class Public Transport, More Singaporeans are looking to Purchase Cars and Motorcycles because of COVID-19

This article is republished with permission from Budget Direct Insurance Singapore.

Amid a nearly full halt to everyday modes of transportation, from flying to ride sharing, we’re starting to see a rise in consumers’ desire for their own personal mode of transportation. Personal spaces are not just limited to our homes but also to our personal vehicles. People’s attitudes toward car ownership, public transportation, and mobility solutions like ride hailing have shifted in the wake of the pandemic.

The use of private transports may have nearly doubled after COVID-19 outbreak. Consequently, reliance on public transportation has fallen drastically.

Public transportation in Singapore is inarguably world-class. It is efficient and clean making getting around the city a breeze for not only locals but also tourists. Yet, with a significant drop in the use of public transport across the world, the pandemic will play out in 2021 and beyond in various ways for vehicle consumers and businesses.

Budget Direct Insurance commissioned a local Singaporean survey of a nationally representative sample of 1,050 Singaporean adults aged 18 years and older conducted by YouGov’s Singapore Omnibus, to understand the long-lasting impact that the Singapore automotive industry and its customers should expect in a post COVID-19 world.

“According to our research, 72% Singaporean adults are planning on buying a car or a motorcycle because of COVID-19.”

This study and research is unprecedented. Held during the 2020 Singapore circuit breaker period, it does not simply call to understand the changes on land transport behaviour during Covid-19 but also attempts to comprehend which ones are here to stay.

COVID-19 Automotive Transformations

The auto industry was already going through a number of transformations, if not disruptions, much before March 2020. Driverless cars, electric mobility, automated vehicle factories, and ridesharing – the industry has been booming unquestioningly. Needless to say, the anticipation of the new Tesla cars, Uber Choppers and 3D-printed cars fully integrated with internet-of-things, have always been topics of pertinent interest for mobility innovation enthusiasts globally.

With travel and hence the automotive industry being deeply curtailed by the pandemic in the first quarter of 2020, car factories worldwide have had not only conduct massive layoffs due to slumping Singapore car sales statistics but also have had to pull their resources out of research and development – this much to the dismay of petrol heads.

In Germany – Europe’s largest car market – new car registrations in the first half of 2020 declined by 35% compared to the same period in 2019. Sales for 2020 across Spain (-51%), UK (-49%) and Italy (-46%) in the first half of 2020 performed even worse, according to the European Automobile Manufacturers Association.

However, whilst February 2020 saw a radical slump of the automotive sector, April saw a pickup, quite to the surprise of several experts. New car acquisitions for daily commuting were on the rise in China since early April 2020 – this especially in the smaller car segments. In Australia, the Federal Chamber of Automotive Industries showed new car sales in October 2020 were down by a mere 1.5% when compared with the same month the previous year, October 2019. This is astonishing especially considering industry experts and the general consensus was that this drop in sales was going to be closer to 20%

To what do we credit this pick up and recovery for the automotive industry that came sooner rather than later?

Permanent Diversion from Public Transport established

In October 2020, Euromonitor International published a report titled “COVID-19 Survey 2020 A Year in Review.” On a global scale, the report conclusively stated that the pool of respondents it interviewed expected a longer-term shift to non-enclosed transport i.e. motorcycle, bikes, bicycles, and e-scooters among others. 33% of those respondents cited that they predicted this to be a permanent shift in the October 2020 report. This increase in conviction is brought into perspective when a similar survey showed that only 20% of respondents cited the same in April 2020. Moreover, 15% of the respondents expected the diversion from public transport to be a permanent shift in October 2020 compared to just 9% in April.

This report was based on Euromonitor’s Voice of the Industry special April’s survey involving 4,812 professionals and October’s survey involving 4,559 professionals across spanning but not restricted to South Africa, Hong Kong, the United Kingdom, Singapore, Australia and Brazil.

“As per our own research, there has been a 12% drop in the use of public transport among Singaporean adults before and after the initial impact of COVID-19.”

Car Purchase Intent on the rise

The increased use and want of personal cars may well have been motivated not only by the consumers’ need for safety during transit but partly also because of the increase in transhumance towards urban locations that require cars for getting around.

According to Think With Google, 93% in the US said they were relying less on public transportation and ride-sharing services and are using personal vehicles more. And among people surveyed in China who do not own a car, the majority responded that they intend to purchase a vehicle for health and safety reasons. The same report revealed that the search interest for “is it a good time to buy a car” grew more than 9X from January and April 2020.

Ernst & Young UK’s May 2020 survey showed that respondents from Italy (47%) and Germany (46%) are more likely to purchase a new car because of COVID-19. Respondents from China were most likely to increase their car usage (90% of respondents), closely followed by India (85%) and Germany (81%).

A car in Singapore costs 3.5 times as much as the same car in the US. With a high cost of living, expensive real estate and the ongoing costs associated with owning a car in Singapore, the latter is indeed an aspirational purchase. Despite everything, in the first half of 2020, according to Value Champion, 32% of total car registrations were of luxury makes, compared to the typical average of 22% over the past 5 years. This change was largely caused by the fact that non-luxury car registrations dropped at a much higher rate than luxury car registrations during the pandemic.

“Our YouGov Omnibus survey concluded that 76% of male Singaporeans intended to purchase a car or motorcycle due to COVID-19. 67% of female Singaporeans thought of doing the same.”

“Their top 3 factors for purchasing a car due to COVID-19 are the usual reasons to buy a car: affordability, maintenance costs and family suits. Avoiding COVID-19 came in relatively low across all demographics.”

Used Cars are Increasingly Popular

By now, it is clear that the COVID-19 pandemic didn’t tank the used car market like many thought it would. And with lesser new COE car registration in Singapore and a low new-cars inventory, the increased demand for cars only means that the demand for used cars is strong. Used car sales are currently outstripping that of new cars by almost two-fold in the U.S., Germany, the U.K and France. Covid-19 has led to an increase in used car sales as people avoid public transportation and are more sensitive to vehicle prices in the recession. For instance, the price difference between a new and used Toyota Corolla Altis 1.6 (A) can be up to 70%. For luxury cars like a BMW M4 Convertible, the savings can go up to 50% with 5 years of COE remaining.

Consumers can now find a greater catalogue of second-hand vehicles online, and dealers are stepping up digital endeavours too. Used car marketplaces are mushrooming on the internet. A typical example are the Facebook marketplace worldwide, Otomoto in Poland and mobil.de in Germany.

Development of a new “car health sector”

Whilst vehicle automation and AI have been important integrations with the automotive industry, COVID-19 seems to have accelerated the research and development efforts towards vehicle health care. Car manufacturers that have so far been focused on sustainability programmes will look to connectivity technologies to keep passengers healthy. From car features that decontaminate in-vehicle air, and measure real-time outdoor pollution, massage seats – every part of a car model is being given another chance at being revisited. This especially as the future of urban transportation is only bound to skyrocket. Geely is already offering antibacterial filters in some of its cars and Jaguar Land Rover is developing a new UV light solution to sanitise surfaces in a car’s interior.

Successful digitalisation of the car sales process

recent McKinsey study concluded that 96% of B2B companies have shifted their business models in response to the COVID-19 crisis, with 64% believing a digital model is just as effective or more than before the pandemic.

Yet, the differences are noteworthy in various parts of the world. According to a survey conducted by Capgemini in May 2020, only 32% of people from the UK, would buy cars online. Asia seemed more willing to embrace the digital process with 44% of Indians being able to imagine buying their car online in the future and 49% of Chinese.

study of digital content in key Southeast Asian countries suggests that despite being hard hit by an economic downturn and restricted logistics, car manufacturers have launches of various car models without losing any momentum – this even if it had to be done virtually. For instance, BMW Indonesia, held a virtual launch of the BMW M2 Edition, even delivering the brand new BMW in container-sized boxes as a precaution.

One US electric-vehicle (EV) maker increased its sales in China by over 10 percent, however. This thanks to their online sales offerings, contactless test-drives, and home car deliveries.

Non-car owners mostly still seeking gasoline or diesel mode

While fuel-operated cars took a hit in early 2020, one segment of the car market continued to grow. Full electric vehicle and hybrid vehicle bucked the trend. In Germany, EV sales from January to June increased from 2019 to in 2020, almost doubled. This was an incredible performance, given the economic and public health situation at the time. Similar trends are evident across Europe with France, for example, seeing an even higher shift to EVs in 2020. As per McKinsey, shared-mobility solutions and EVs might see greater uptake during the crisis and even more afterward. The EV market might see additional tailwinds if the government approves the green-mobility incentives that are currently under discussion.

Projections for a Post-COVID 19 Car Purchase

  1. More millennials have the intention of purchasing cars

Ernst & Young UK discovered that nearly a third of people without a car intend to buy one in the next six months. 45% of those will be millennials. More than three-quarters (78%) of respondents say that they are going to be more likely to use their cars for travel in a post-pandemic world.

Does Singapore follow suit in this trend – especially in the face of the world’s leading public transportation system by all means? A survey commissioned by The Sunday Times and carried out by Nexus Link in 2019 found that nearly two-thirds of 18 to 35 year olds aspire to own a car within the next five years. While commenting on the same survey, Dr Walter Theseira, Associate Professor of Economics at Singapore University of Social Sciences shared, “It is telling, after all, how demand for high end cars is robust in Singapore despite the tax structure.”

Currently, younger demographics are looking to buy hybrids, however as compared to their older counterparts, cannot afford them. However, it is clear that previously financially incapacited millennials are saving towards car purchase in Singapore.

Our research revealed that the 25-34 age bracket were the highest responders with nearly 8 out 10 of them planning to buy a car or motorcycle due to COVID-19.

  1. An increased customer-centrism

R&D in the automotive industry is still happening but with less adaptations to car and motorcycle models and with an increased focus on customer-centrism and customisation. People want the dealer experience closer to home. At-home test drives   and vehicle delivery were tied as the number 1 alternative to visiting a car dealership for auto shoppers. At a time when social restrictions related to the pandemic are impacting consumer behaviour, developing strategies for how to meet consumer demand for online buying and at-home delivery can make a large impact: 18% of auto shoppers would buy a vehicle sooner if they could purchase the vehicle they wanted without going to a dealership.

  1. More pollution

It can be argued that with a rise in eco-consciousness after the advent of the 2020 pandemic, thanks to massive drops in pollution levels across the world in busy cities often shrouded with grey smog, the demand for more sustainable modes of travel would be on the rise.

However, while the “AUTOMOTIVE INDUSTRY UPDATE: CORONAVIRUS IMPACT” (Euromonitor International, May 2020) report depict demand for electric vehicles to increase in the long term, a different report from EY in August 2020 that surveyed 3,300 respondents over 8 different countries announce that 71% of non-car owners currently seeking a new car are looking to buy a gasoline or diesel model, with just 6% looking to purchase a purely electric vehicle and 23% looking to buy a hybrid.

“Even our YouGov research revealed that in Singapore, only 14% – 10% of younger demographics would opt for eco-friendly options while other demographics have almost an even split of 6-8%.”

These are not high rates of intended adoption and may consequently result in expected increased levels of pollution in the region.

Conclusion

Mobility will always be a basic human need. To prepare for the future, mobility-industry players should immediately adjust their strategies to navigate the current crisis and prepare for the next normal. Looking ahead, companies can develop a detailed plan for ramping up operations.  Regardless of qualifiers, the sentiment behind the findings is great news for an automotive industry currently enduring some global headwinds.

These differences could significantly impact customer demand and available travel options, potentially making mobility truly hyperlocal. Since city policies may vary widely, mobility players will need to tailor their key performance indicators to each city. The pandemic is surely becoming a catalyst for more changes.

It will be interesting to see how these statistics around new and used car sales and buyer behaviour changes as we settle into a COVID aware world where consumer health, social distancing measures and other COVID related precautions have become the norm.

 

===========================
Car insurance due? Get peace of mind with BUDGET DIRECT INSURANCE. Get full protection with great insurance cover. Use Affinity code ROADSSG to enjoy 5% off premium.
Don’t wait, get an instant quote today!

Be part of our team of contributors! You can submit your videos via the following ways:
1. Whatsapp to 96667153
2. Telegram
3. Facebook groups
4. Online Forms
How do you feel about this?
Love
Haha
Wow
Sad
Angry
You have reacted on "Are more Singaporeans buying cars and motorcycl..." A few seconds ago