The pace of penetration of China’s auto-finance market has reached 35 percent, a jump from the 20 per cent last recorded in 2014. Though with auto-related financing still significantly lagging behind developed markets, there could be significant opportunities ahead for auto finance providers, according to a different report by Roland Berger and Credit First Financial Leasing.
China sold a record 24.5 million vehicles a year ago. But from the high sales figures, the entire volume of 車貸 outstanding that are taken out from autofinancing companies stand with a low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to keep strong this season inspite of the slowdown within the economy, making car financing strategy all the more potent.
“China’s autofinance penetration is significantly 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 have reached 81 and 64 %, respectively. Even India, like a developing market, has reached global levels.
“As an important industry for car sales, the gaps in China’s level of development against these markets are significant . But it really could mean significant potential and room for development ahead,” Zhang said.
Overall, you can find 25 autofinance companies in China. Roland Berger said many of them were designed by foreign automakers whenever they put in place their carmaking joint ventures.
Among them BMW, Volkwagen and Toyota rank as the biggest players in the market by registered capital.
More domestic car makers are during this process of playing get caught up. Since this past year, domestic carmakers added seven financing companies on the market.
Some companies are already funding their business through the shareholders’ own capital or bank borrowings. While growing, autofinance companies funded 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 auto loan receivables have been low to date,” said Standard & Poor’s in a report on Monday.
The article author noted investors are attracted to asset backed securities for their short tenors and just how the repayments are structured.
Drawn through the sector’s growth potential, commercial banks are also accelerating their techniques to compete against the autofinance companies although banks mostly still target dealers to provide financing on the wholesale level.
Bank of Communications and Everbright Bank started to create dedicated autofinancing centres to do business with dealers who definitely are most challenged by liquidity issues.
“It’s tough business as a dealer. They should react to 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 may remain focused about the dexrpky33 business, providing autofinancing then is a key supply of business for these people,” Zhang said.
Further to funding first-hand sales, Zhang noted plenty of other chances to capture value over a car’s useful life, including financing second-hand purchases, 汽車貸款 and evencar insurance, that is now majority dominated by 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 just last year. The figure is again far below western market levels, when a ratio of several second-hand cars against every new car for sale will be the norm.
The report’s authors said as being a next thing, financial technology or “fintech”combined using the car sharing apps, may 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 how they may beat backchallengers like Uber who threaten car sales.