The velocity of penetration of China’s auto-finance market has reached 35 per cent, a jump through the 20 percent last recorded in 2014. But with auto-related financing still significantly lagging behind developed markets, there might be significant opportunities ahead for auto finance providers, according to a new report by Roland Berger and Credit First Financial Leasing.
China sold an archive 24.5 million vehicles just last year. But against the high sales figures, the complete number of 車貸 outstanding which can be removed from autofinancing companies stand at the low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to keep strong this season in spite of the slowdown from the economy, making car financing strategy a lot more potent.
“China’s autofinance penetration is significantly below other mature markets,” said Zhang Junyi, senior conulstant at Roland Berger and Wang Wei, chairman of Credit First, who are the report’s authors.
They noted that car financing in US and Germany have reached 81 and 64 %, respectively. Even India, like a developing market, has reached global levels.
“As an important market for car sales, the gaps in China’s measure of development against these markets are significant . But it could mean significant potential and room for development ahead,” Zhang said.
Overall, there are actually 25 autofinance companies in China. Roland Berger said most of them were introduced by foreign automakers whenever they setup their carmaking joint ventures.
And this includes BMW, Volkwagen and Toyota rank since the biggest players on the market by registered capital.
More domestic car makers are during this process of playing get caught up. Since just last year, domestic carmakers added seven financing companies for the market.
A lot of companies happen to be funding their business from the shareholders’ own capital or bank borrowings. While growing, autofinance companies funded a few 35 billion yuan from asset backed securities this current year.
“China auto loan ABS have performed well in 2016. The cumulative default rate and cumulative net losses of car loan receivables are already low so far,” said Standard & Poor’s in a report on Monday.
The writer noted investors are fascinated by asset backed securities for their short tenors and how the repayments are structured.
Drawn with the sector’s growth potential, commercial banks were also accelerating their strategies to compete up against the autofinance companies although banks mostly still target dealers to offer financing in the wholesale level.
Bank of Communications and Everbright Bank started to put in place dedicated autofinancing centres to use dealers who definitely are most challenged by liquidity issues.
“It’s tough business as a dealer. They have to react to the alternative energy trend and set up new partnerships. Dealers themselves have entered your third wave. Previously, their strategy was flag planting, gaining market share by massive mergers and acquisitions. When dealers insist they may stay focused about the dexrpky33 business, providing autofinancing then is a key way to obtain business to them,” Zhang said.
Further to funding first-hand sales, Zhang noted a lot of other chances to capture value across a car’s useful life, for example financing second-hand purchases, 汽車貸款 and evencar insurance, that is now majority covered with three insurers, including PICC, Ping An and China Pacific.
Against every new car that is sold, Roland Berger estimates second-hand cars saw a turnover of just .2 – .3 per car in China last year. The figure is again far below western market levels, wherein a ratio of 2 or 3 second-hand cars against every new car being sold is definitely the norm.
The report’s authors said like a following step, financial technology or “fintech”combined with the car sharing apps, can be an accelerator to aid answer the service gaps that can be found in China.
Roland Berger said BMW’s DriveNow pooled car leasing service or Daimler’s Moovel carpooling app launched from Germany are examples to China’s players about how they may beat backchallengers such as Uber who threaten car sales.