The pace of penetration of China’s auto-finance market has reached 35 %, a jump in the 20 per cent last recorded in 2014. However with auto-related financing still significantly lagging behind developed markets, there could be significant opportunities ahead for auto finance providers, according to a new report by Roland Berger and Credit First Financial Leasing.
China sold a record 24.5 million vehicles just last year. But up against the high sales figures, the whole amount of 車貸 outstanding that are taken off from autofinancing companies stand in a low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to stay strong this current year in spite of the slowdown in the economy, making car financing strategy a lot 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 definitely 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 significant marketplace for car sales, the gaps in China’s measure of development against these investing arenas are significant . However it could mean significant potential and room for development ahead,” Zhang said.
Overall, there are 25 autofinance companies in China. Roland Berger said many of them were created by foreign automakers whenever they create their carmaking joint ventures.
And this includes BMW, Volkwagen and Toyota rank since the biggest players in the marketplace by registered capital.
More domestic car makers are during this process of playing catch up. Since a year ago, domestic carmakers added seven financing companies to the market.
Most companies happen to be funding their business from the shareholders’ own capital or bank borrowings. While growing, autofinance companies funded just some 35 billion yuan from asset backed securities this coming year.
“China auto loan ABS have performed well in 2016. The cumulative default rate and cumulative net losses of auto loan receivables have already been low up to now,” said Standard & Poor’s in the report on Monday.
This writer noted investors are attracted to asset backed securities for his or her short tenors and how the repayments are structured.
Drawn from the sector’s growth potential, commercial banks are also quickening their methods to compete versus the autofinance companies although banks mostly still target dealers to provide financing at the wholesale level.
Bank of Communications and Everbright Bank have started to create dedicated autofinancing centres to do business with dealers who are most challenged by liquidity issues.
“It’s tough business to be a dealer. They have to answer the renewable energy trend and set up new partnerships. Dealers themselves have entered your third wave. Previously, their strategy was flag planting, gaining market share by large mergers and acquisitions. When dealers insist they may stay focused in the dexrpky33 business, providing autofinancing then turns into a key method to obtain business for them,” Zhang said.
Further to funding first-hand sales, Zhang noted a good amount of other opportunities to capture value over 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 a year ago. The figure is again far below western market levels, wherein a ratio of a couple of second-hand cars against every new car offered will be the norm.
The report’s authors said like a following step, financial technology or “fintech”combined with the car sharing apps, could be an accelerator to assist answer the service gaps that 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 regarding how they may beat backchallengers such as Uber who threaten car sales.