The rate of penetration of China’s auto-finance market has reached 35 per cent, a jump through 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 a different report by Roland Berger and Credit First Financial Leasing.
China sold an archive 24.5 million vehicles just last year. But versus the high sales figures, the complete number of 車貸 outstanding which are taken out from autofinancing companies stand in a low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to be strong this year inspite of the slowdown inside the economy, making car financing strategy all the 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, that are the report’s authors.
They noted that car financing in US and Germany are at 81 and 64 %, respectively. Even India, being a developing market, has reached global levels.
“As a significant marketplace for car sales, the gaps in China’s amount of development against these investing arenas are significant . Nevertheless it could mean significant potential and room for development ahead,” Zhang said.
Altogether, you can find 25 autofinance companies in China. Roland Berger said the majority of them were designed by foreign automakers once they put in place their carmaking joint ventures.
Among them BMW, Volkwagen and Toyota rank as being the biggest players on the market by registered capital.
More domestic car makers are at the same time of playing get caught up. Since last year, domestic carmakers added seven financing companies on the market.
Most companies have already been funding their business by 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 car loan ABS have performed well in 2016. The cumulative default rate and cumulative net losses of car loan receivables happen to be low up to now,” said Standard & Poor’s in the report on Monday.
This writer noted investors are fascinated by asset backed securities for his or her short tenors and how the repayments are structured.
Drawn from the sector’s growth potential, commercial banks were also quickening their strategies to compete up against the autofinance companies although banks mostly still target dealers to offer financing with the wholesale level.
Bank of Communications and Everbright Bank began to put in place dedicated autofinancing centres to do business with dealers who definitely are most challenged by liquidity issues.
“It’s tough business to become dealer. They need to react to the renewable power trend and set up new partnerships. Dealers themselves have entered the third wave. Previously, their strategy was flag planting, gaining market share by large mergers and acquisitions. When dealers insist they are going to stay focused in the dexrpky33 business, providing autofinancing then is a key supply of business on their behalf,” Zhang said.
Further to funding first-hand sales, Zhang noted a lot of other possibilities to capture value over 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 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, when a ratio of two or three second-hand cars against every new car being offered may be the norm.
The report’s authors said as being a next thing, financial technology or “fintech”combined using the car sharing apps, could be an accelerator to aid 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 about how they can beat backchallengers like Uber who threaten car sales.