The rate of penetration of China’s auto-finance market has reached 35 per cent, a jump in the 20 % last recorded in 2014. Although with auto-related financing still significantly lagging behind developed markets, there may 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 from the high sales figures, the total number of 車貸 outstanding that are taken out from autofinancing companies stand at a low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to remain strong this coming year regardless of the slowdown in the economy, making car financing strategy a lot more potent.
“China’s autofinance penetration is way below other mature markets,” said Zhang Junyi, senior conulstant at Roland Berger and Wang Wei, chairman of Credit First, that are the report’s authors.
They noted that car financing in US and Germany are in 81 and 64 percent, respectively. Even India, as being a developing market, has reached global levels.
“As a serious industry for car sales, the gaps in China’s amount of development against these financial markets are significant . But it could mean significant potential and room for development ahead,” Zhang said.
Altogether, you will find 25 autofinance companies in China. Roland Berger said most of them were introduced by foreign automakers when they setup their carmaking joint ventures.
Among them BMW, Volkwagen and Toyota rank because the biggest players in the market by registered capital.
More domestic car makers are along the way of playing get caught up. Since this past year, domestic carmakers added seven financing companies to the market.
Some companies happen to be funding their business from the shareholders’ own capital or bank borrowings. While growing, autofinance companies funded some 35 billion yuan from asset backed securities this season.
“China car loan ABS have performed well in 2016. The cumulative default rate and cumulative net losses of car loan receivables have been low to date,” said Standard & Poor’s in the report on Monday.
The writer noted investors are drawn to asset backed securities for short tenors and how the repayments are structured.
Drawn by the sector’s growth potential, commercial banks have also been increasing their strategies to compete up against the autofinance companies although banks mostly still target dealers to deliver financing on the wholesale level.
Bank of Communications and Everbright Bank began to set up dedicated autofinancing centres to use dealers who happen to be most challenged by liquidity issues.
“It’s tough business as a dealer. They need to respond to the alternative energy trend and set up new partnerships. Dealers themselves have entered the third wave. Previously, their strategy was flag planting, gaining market share by large scale mergers and acquisitions. When dealers insist they will remain focused in the dexrpky33 business, providing autofinancing then turns into a key source of business on their behalf,” Zhang said.
Further to funding first-hand sales, Zhang noted lots of other opportunities to capture value over a car’s useful life, including financing second-hand purchases, 汽車貸款 and evencar insurance, which can be now majority covered with three insurers, including PICC, Ping An and China Pacific.
Against every new car that may be sold, Roland Berger estimates second-hand cars saw a turnover of just .2 – .3 per car in China a year ago. The figure is again far below western market levels, when a ratio of 2 or 3 second-hand cars against every new car being offered is the norm.
The report’s authors said being a next phase, financial technology or “fintech”combined with all the car sharing apps, could be an accelerator to help answer the service gaps which exist 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 on how they might beat backchallengers like Uber who threaten car sales.