The velocity of penetration of China’s auto-finance market has reached 35 percent, a jump through the 20 percent last recorded in 2014. But with auto-related financing still significantly lagging behind developed markets, there may be significant opportunities ahead for auto finance providers, according to a different report by Roland Berger and Credit First Financial Leasing.
China sold an archive 24.5 million vehicles a year ago. But up against the high sales figures, the whole number of 車貸 outstanding which can be taken off from autofinancing companies stand with a low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to stay strong this year regardless of the slowdown within the economy, making car financing strategy much 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, who definitely 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, as being a developing market, has reached global levels.
“As a major marketplace for car sales, the gaps in China’s degree of development against these markets are significant . But it really 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 introduced by foreign automakers whenever they setup their carmaking joint ventures.
One of them BMW, Volkwagen and Toyota rank as the biggest players on the market by registered capital.
More domestic car makers are at the same time of playing catch up. Since last year, domestic carmakers added seven financing companies on the market.
Most companies are already funding their business through the shareholders’ own capital or bank borrowings. While growing, autofinance companies funded just some 35 billion yuan from asset backed securities this 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 up to now,” said Standard & Poor’s in a report on Monday.
The article author noted investors are interested in asset backed securities for short tenors and the way the repayments are structured.
Drawn with the sector’s growth potential, commercial banks have also been quickening their methods to compete versus the autofinance companies although banks mostly still target dealers to provide financing with the wholesale level.
Bank of Communications and Everbright Bank have started to put in place dedicated autofinancing centres to work alongside dealers that are most challenged by liquidity issues.
“It’s tough business to become dealer. They should react to the alternative energy trend and set up 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 may remain focused around the dexrpky33 business, providing autofinancing then is a key method to obtain business for them,” Zhang said.
Further to funding first-hand sales, Zhang noted a lot of other chances to capture value over a car’s useful life, like financing second-hand purchases, 汽車貸款 and evencar insurance, which happens to be now majority covered with three insurers, including PICC, Ping An and China Pacific.
Against every new car which is sold, Roland Berger estimates second-hand cars saw a turnover of just .2 – .3 per car in China just last year. The figure is again far below western market levels, where a ratio of 2 or 3 second-hand cars against every new car offered may be the norm.
The report’s authors said being a following step, financial technology or “fintech”combined together with the car sharing apps, may be an accelerator to help you 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 can beat backchallengers for example Uber who threaten car sales.