The speed of penetration of China’s auto-finance market has reached 35 percent, a jump through the 20 per cent last recorded in 2014. Though with auto-related financing still significantly lagging behind developed markets, there may be significant opportunities ahead for auto finance providers, according to an alternative report by Roland Berger and Credit First Financial Leasing.
China sold an archive 24.5 million vehicles just last year. But up against the high sales figures, the whole volume of 車貸 outstanding which can be removed from autofinancing companies stand in a low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to remain strong this season despite the slowdown from the economy, making car financing strategy much more potent.
“China’s autofinance penetration is far 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 tend to be at 81 and 64 per cent, respectively. Even India, being a developing market, has reached global levels.
“As an important marketplace 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.
As a whole, there are actually 25 autofinance companies in China. Roland Berger said a lot of them were created by foreign automakers after they setup their carmaking joint ventures.
One of them BMW, Volkwagen and Toyota rank since the biggest players in the marketplace by registered capital.
More domestic car makers are along the way of playing get caught up. Since just last year, domestic carmakers added seven financing companies towards the market.
Many businesses have been funding their business with the shareholders’ own capital or bank borrowings. While growing, autofinance companies funded a few 35 billion yuan from asset backed securities this season.
“China auto 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 author noted investors are drawn to asset backed securities for his or her short tenors and exactly how the repayments are structured.
Drawn through the sector’s growth potential, commercial banks were also speeding up their approaches to compete from the autofinance companies although banks mostly still target dealers to deliver financing in the wholesale level.
Bank of Communications and Everbright Bank have started to put in place dedicated autofinancing centres to do business with dealers that are most challenged by liquidity issues.
“It’s tough business to become a dealer. They should answer the alternative energy trend and set up new partnerships. Dealers themselves have entered the 3rd wave. Previously, their strategy was flag planting, gaining market share by large scale mergers and acquisitions. When dealers insist they will likely stay focused about the dexrpky33 business, providing autofinancing then becomes a key source of business to them,” Zhang said.
Further to funding first-hand sales, Zhang noted lots of other opportunities to capture value spanning a car’s useful life, like 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 last year. The figure is again far below western market levels, when a ratio of two or three second-hand cars against every new car being offered is definitely the norm.
The report’s authors said like a next step, financial technology or “fintech”combined using the car sharing apps, can be an accelerator to help you answer the service gaps which one can find 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 including Uber who threaten car sales.