The Chinese automotive finance market is still young and fruitful. In China the car finance market is approximately 25 to 35% whereas in North America and Europe it is approximately 80 to 90%. When compared to North America and Europe the maturity of financing car in China is quite different. China market hugely depends on the country’s culture and the perception of the end user about the money and saving scenario. But the recent China stock exchange crash has made it clear that the people in China also relies on credit to fulfill their ambitions. Automo expects that the automotive finance market in China has a huge potential in the future and the automakers offering their product and services should also cater to financing.
The consumer credit reporting was the initiative started by Central Bank of China. The initiative is now completed and provides the finance offering companies a clear picture about their customer risk taking appetite in an accurate manner.
The companies that are willing to enter the China market should represent innovative products and offerings to compete in the market with the local and existing foreign players. The product offered by the companies should have essential elements for financing a car such as management of the credit risk and the provision for liquidity. This will portray the basic difference between the business and its approach as compared to the local banks and finance companies in China.
The companies should offer one-stop shopping approach for all the customers. The customer should be able to finance and buy all the products from a single source and not wander to other companies for a different product. For the electric vehicles, in future few companies will be offering the vehicle without the battery to reduce or make the perception of the cost-effective car. In that case, the end user needs to buy the battery from some other source and it will be difficult for the finance companies to offer a one-stop-shop solution. In this case, the companies need to offer all the products to satisfy customer demand and if they are not offering the complete product then a collaboration is necessary with the third party dealer to be successful in this particular market.
A few years back the economy of China was going down and as a result, the country has depreciated their currency value and the economy started to develop again. Thus, the financing business for automotive is also developing with the economy, further satisfying people’s consumption demands. Now the Chinese population is acknowledging the benefits of financing a car which further help to manage the household budget more effectively.
Automo expects that in medium to long term, the China car finance market will be approximately 45 to 55%. The captives and other financial companies should focus on offering the solution for complete value chain. China being the manufacturing hub for parts, this move will provide the automotive finance companies to spread its network widely in China Automotive market.