The velocity of penetration of China’s auto-finance market has reached 35 %, 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 an alternative report by Roland Berger and Credit First Financial Leasing.
China sold an archive 24.5 million vehicles this past year. But versus the high sales figures, the complete amount of 車貸 outstanding which can be taken off from autofinancing companies stand at the low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to remain strong this season in spite of the slowdown within the economy, making car financing strategy even more potent.
“China’s autofinance penetration is much below other mature markets,” said Zhang Junyi, senior conulstant at Roland Berger and Wang Wei, chairman of Credit First, who happen to be the report’s authors.
They noted that car financing in US and Germany have reached 81 and 64 percent, respectively. Even India, as being a developing market, has reached global levels.
“As a serious niche for car sales, the gaps in China’s level of development against these financial markets 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 when they put in place their carmaking joint ventures.
One of them BMW, Volkwagen and Toyota rank since the biggest players available in 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 towards the market.
Some companies have been 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 season.
“China auto loan ABS have performed well in 2016. The cumulative default rate and cumulative net losses of car loan receivables are already low to date,” said Standard & Poor’s within a report on Monday.
The writer noted investors are interested in asset backed securities for their short tenors and just how the repayments are structured.
Drawn from the sector’s growth potential, commercial banks are also quickening their approaches 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 began to set up dedicated autofinancing centres to use dealers who are most challenged by liquidity issues.
“It’s tough business as a dealer. They have to respond to the renewable energy trend and set up new partnerships. Dealers themselves have entered the 3rd wave. Previously, their strategy was flag planting, gaining market share by massive mergers and acquisitions. When dealers insist they will likely remain focused around the dexrpky33 business, providing autofinancing then becomes a key method to obtain business for these people,” Zhang said.
Further to funding first-hand sales, Zhang noted a good amount of other the opportunity to capture value spanning a car’s useful life, like 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 certainly 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, wherein 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 next phase, financial technology or “fintech”combined using the car sharing apps, could be an accelerator to assist 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 like Uber who threaten car sales.