Summary: The future of automobile finance enterprises in China

Gasgoo.com (Shanghai) - Compared with other markets, automobile financing in China is developing relatively slowly. Despite this, the country possesses several characteristics that set it apart from the rest of the world. In the following article, translated by Gasgoo.com (Chinese), Li Jun, a taxation and commercial consultant with PricewaterhouseCoopers China, shared his perspectives on the state of automobile financing in China today.

In 2012, less than 20 percent of vehicle purchases in the country were made using automobile financing. This is partially due to traditional Chinese views regarding debit and credit. As these views begin to change, the demand for automobile financing will continue to grow.

The lack of specialized companies and predominance of banks in the Chinese automobile finance sector

Automobile finance companies are the main outlets that provide financing services overseas. Financing services offered by banks in these markets are generally decreasing.

In China, the development of automobile finance companies has been relatively slow. As such, commercial banks remain the major provider of financing services. Banks possess significant advantages in capital and customer resources. However, banks may still lack a through understanding of the automobile market. Therefore, when conducting risk management, especially when assessing an individual's credit risk, they may have to invest more resources than a company specifically dealing in financing would have to. Furthermore, since banks do not have a clear relationship with automobile manufacturers and are primarily concerned with maintaining a favorable interest margin, they may not act in accordance with market trends. Relatively complex application processes associated with obtaining automobile financing from banks are another issue of concern.

The growth potential of automobile finance companies in China

Despite the fact that automobile finance services still require time to grow in China, their development prospects are especially good. On the one hand, we predict that there will be more government policies encouraging the development of the industry, such as those lessening or removing various restrictions. On the other hand, we see the appearance of new automobile financing companies in emerging local markets, including those in second-tier and third-tier cities.

The growth of automobile financing companies is linked how automobile manufacturers and dealerships develop, as well as changing consumer demand in the market. If they are able to solve their resource problems and properly utilize their expert industry knowledge, the development potential of these companies remains very high.

We predict automobile finance companies to be a major provider of automobile finance services in the future.

The importance of foreign enterprises in developing the industry

Current Chinese policies place certain marketing and capital limitations on foreign-owned finance enterprises. We hope that these policies will be gradually relaxed in the future. Foreign finance companies possess much more experience than their domestic counterparts. If we seek to encourage growth in the country's automobile finance industry, restrictions should be relaxed with the aim of attracting more companies in their field, which in turn will aid in developing the segment while also helping cultivate local talent and increasing the competence of domestic enterprises.

Major advantages of automobile finance enterprises

The most important factors consumers consider when going to an automobile finance company for their financing needs are how low their interest rates are and the ease of applying for credit. Being able to satisfy these two demands, especially the former, are crucial for automobile finance companies to attract consumers. Specialized companies should strive to keep their application procedures simpler than those of banks', as well as deciding on appropriate interest rates.