AMSIA MOTORS, GLOBAL: Auto finance & Sales rising, by 2017 !

When it comes to providing auto financing, China is steps away from countries including Canada and America, but this is about to change.

The huge hike in China?s auto sales is no longer the subject of China?s newspaper headlines. Back in 2011 when CAAM (China Association of Automobile Manufacturers) projected that the sales of passenger cars in the country will likely rise 11 percent to 16 million vehicles, while the sales of commercial vehicles will drop 3 percent to 3.9 million units, no one imagined that within one year, China would also diversify its market for vehicle loans.
So what exactly is happening in China?s auto financing industry? It has witnessed two recent major changes: one is a rise in demand for expensive vehicles, and the other is a rise in the number of local and foreign automobile manufacturers that are currently offering auto-financing, some of which include Volkswagen, BMW, and Nissan Motor Co.?

While the rise in demand/sales was expected, the high sale of these vehicles to China?s youth population was unexpected. China?s youth are willing to go-into-debt for the sake of owning an expensive vehicle before their late 20?s.
?Young Chinese are very comfortable with the idea of credit to buy big-ticket items,? said Shuan Rein, managing director of China Market Research in Shanghai.? It doesn?t make sense for them to have to work for 5 to 10 years to save up for it.?
Young Chinese adults are not the only ones that are willing to cash-out a lot of money to invest in expensive vehicles. Manufacturing companies including Volkswagen, BMW, and Nissan Motor CO., are also making huge investments.

?Volkswagen, the No.2 foreign manufacturer in China after GM, plans to invest 2 billion yuan to expand auto financing in China this year,? said Cai Xue, a VW spokesman in Beijing. The company also has plans to offer financing to customers seeking to upgrade their old models. Since its 56 percent increase in auto sales back in 2011, Volkswagen has seen so much more demand for its products.
BMW says its China loans portfolio has risen to more than 10 billion yuan, a six-fold increase over 2010. The company forecasts that a quarter of all auto purchases in China will be funded by loans in three years and that half will be financed by 2025.
Nissan Motor Co., the biggest Japanese automaker by sales in China, has also invested in auto financing; the company believes that credit used to purchase vehicles will definitely be the new trend in China. ?Currently, buyers of expensive cars seek financing while those who want more modest vehicles typically pay cash,? said Kimiyasu Nakamura, president of Nissan?s Joint venture.?

Auto financing companies provided about 200 billion yuan ($31 billion) of loans last year, according to a carmaker in China.

While these auto manufacturers expand their auto-financing, other manufacturers and or companies including Amsia Motors will benefit from more opportunities to market their products. As young adults gain more access to financing their vehicle purchases, certain products only marketed to a specific age group, can now be marketed to them. And these include the sales of electric cars.
?We think there will be more and more young people using our loan products when they buy cheaper cars,? Nakamura said last month at a Nissan event in the northern port city of Dalian, where the automaker is building a new plant.
However, no matter how popular auto financing becomes, not every young adult will be eligible for this form of credit. Credit scores will play a huge role in the decision process. Despite this factor, though, China?s banks continue to see increases in the number of overdue credit card balances associated with the purchases of vehicles.

Based on a recent report filed by the People?s Bank of China, Credit card balances overdue for more than six months rose 9.1 percent from the previous quarter to 12 billion yuan as of the end of March.
Clearly, China has benefited greatly from introducing auto financing into its economy. If the auto financing industry continues to expand at the current rate, the country may soon be three steps ahead of Canada and America; this, however, will all depend on how well China?s automotive companies can control the credit-worthiness of every buyer, and how well the country?s government can monitor the industry.?

(By Nour Saqqa)

Source: http://amsiamotorsglobal.blogspot.com/2012/07/auto-finance-sales-rising-by-2017.html

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