The rate of penetration of China’s auto-finance market has reached 35 percent, a jump through the 20 per cent last recorded in 2014. But with auto-related financing still significantly lagging behind developed markets, there might 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 this past year. But up against the high sales figures, the entire volume of 車貸 outstanding that are removed from autofinancing companies stand in a low of just 392 billion yuan. With supportive government policies available, vehicle sales are poised to remain strong this coming year regardless of the slowdown inside the economy, making car financing strategy even 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, that 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 significant niche for car sales, the gaps in China’s degree of development against these markets are significant . Nevertheless it could mean significant potential and room for development ahead,” Zhang said.
Altogether, you will find 25 autofinance companies in China. Roland Berger said most of them were designed by foreign automakers whenever they setup their carmaking joint ventures.
One of them BMW, Volkwagen and Toyota rank as being the biggest players available in the market by registered capital.
More domestic car makers are in the process of playing catch up. Since last year, domestic carmakers added seven financing companies towards the market.
A lot of companies happen to be funding their business through the shareholders’ own capital or bank borrowings. While growing, autofinance companies funded a few 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 have already been low to date,” said Standard & Poor’s in the report on Monday.
The writer noted investors are drawn to asset backed securities for his or her short tenors and exactly 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 provide financing in the wholesale level.
Bank of Communications and Everbright Bank have started to create dedicated autofinancing centres to use dealers who happen to be most challenged by liquidity issues.
“It’s tough business as a dealer. They should answer the renewable 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 mergers and acquisitions. When dealers insist they will remain focused around the dexrpky33 business, providing autofinancing then turns into a key method to obtain business for these people,” Zhang said.
Further to funding first-hand sales, Zhang noted a good amount of other opportunities to capture value across a car’s useful life, such as financing second-hand purchases, 汽車貸款 and evencar insurance, which can be now majority dominated by 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 last year. The figure is again far below western market levels, where a ratio of several second-hand cars against every new car being sold is definitely the norm.
The report’s authors said as being a next phase, financial technology or “fintech”combined with all the car sharing apps, might be an accelerator to assist answer the service gaps that can be found 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 may beat backchallengers including Uber who threaten car sales.