The news has been forceful: car sales fell 26.7 percent in the first half compared to last year. Given this, the usual suspects appear to explain the bad behavior: high interest rates, household debt and an expensive dollar, which is not enough to explain what is happening.
Household spending in 2023 comes with strong contractions in all categories, from rice to financial transactions, mainly explained by excess purchases in 2021 and 2022 and the adjustment in spending after the pandemic, where it went from being at home to going out back to the world. But the category of vehicles has had a stronger performance.
It has been said that having a car is for the “rich” and the evidence shows the opposite: by 2022, more than 90 percent of the cars are owned by people living in strata 1, 2, and 3, which is consistent with the structure of our population, and knowing that only 13.7 percent of households in Colombia have a car, means that the car is far from being a luxury product, but it is a product that is not easy to have due to the expenses it causes and the need to have a place to park it. Additionally, in recent years, people preferred to buy motorcycles (23.7 percent of households), the price tag and license plate regulations discourage having it, the rise in the price of gasoline and the increase in age change the relationship with the vehicle .
(Also read: These are the new cars that fell the most in sales in Colombia: the downturn is strong).
A car is to have a solution available for mobility and it is also to have constant spending on gasoline, insurance, oil changes, parking, among others. Men tend to have a car for a matter of power, identity, strength, and women, for freedom, autonomy and independence. Interestingly, according to the 2022 Runt data, only 35.8 percent of cars are owned by women, which leaves on the table a huge opportunity for brands and a very clear question: how to sell more to women and why aren’t they doing it now?
With this data, It could be said that 87 percent of households in Colombia do not have a car. and that we can easily sell more units in the country, but the reality is the opposite: they don’t have it, they can’t and/or they don’t want to have it.
People over 50 grew up with the idea that having a car is an investment that appreciated, and after the expansion of the category this century, the opposite is happening: the prices of used cars lose value every year. year, as is the case all over the world. This has been a factor that has made people of these generations see today as “a bad business” to have a car. People between the ages of 30 and 50 see it as a mobility need for the family, the market, tourism and even as a symbol of development and success, knowing that it is a heavy monthly cost for the family. Some young people under 30 see the car as a different element: it is polluting, it is not necessary, it does not give status or generate satisfaction.
(Also: This is the top 20 best-selling new cars in Colombia: which one is the king?).
These changes in perception suggest that the industry’s approach to its own product must be radically changed, since this situation implies that a large part of the market has wrong ideas about the product. A good example of this is what has happened with the idea that “cars pollute” and the truth is that what pollutes is the type of fuel and the amount of it used, something that has changed with hybrid vehicles. and electrical.
2022 was a year in which more cars should have been sold, but the brands cannot bring to the market all that are needed due to the fracture in the global production and supply chain due to the confinements, and this suggested that in 2023 the market has a better behavior; However, 2023 is a year that begins with rising inflation, reducing the purchasing power of households, with interest rates rising at the same rate and with a more expensive dollar, and this leads banks to increase their requirements to lend . For this reason, added to the change in perception, the monthly expense that it implies and that it has not been possible to sell to more women, the 2023 market will be recorded as one of the toughest in history.
Camilo Herrera Mora
Radar Founder
