2015 China Auto Finance Report

The viewpoints / key findings

Though China is the world's largest new car market, the scope and the maturity level of its auto aftermarket services are still far behind the developed markets. According to auto finance services' development history in the developed markets, a matured mechanism of vehicle production, sales, and distribution will fuel the progress of auto finance services. The followings are the main takeaways from "2015 China Auto Finance Report".

• In China, the penetration rate of auto finance was 20% in 2014, much lower than the penetration rate in the developed markets. As auto finance products become more acceptable to the consumer born after 1980 and 1990, many market players see the growth potential and start to invest in the auto finance business. With the internet companies joining the auto finance market, the competitive landscape will become more dynamic. Deloitte predicts that China's auto finance penetration rate will reach 50% in 2020.
• China auto financial leasing is still in its infancy, but the market size is expanding rapidly as the car rental companies, OEMs, dealers and financial leasing companies are actively entering the game. With an increasing number of cities announce the limitation on new car purchase and license plates, consumer in those cities have a stronger incentive to turn to auto financial leasing service when purchasing a car.
• China auto operating leasing service is in the early development phase. Currently, the long-term rental service is the mainstream, but the short-term rental service is growing fast. Vehicle leasing is a heavy asset and low profit business. China auto operating leasing market is highly fragmented, but the situation will be improved as China auto market becomes more mature.
• China's used car market is highly fragmented and decentralized. Independent dealers in various regions account for 70-80% of total trading volume. But, the pace of consolidation is accelerating. As the concept of the used car becomes more acceptable to consumer, used car related services are going to be one of major profit streams for auto dealers during the economic downturn.
• 2014 could be viewed as the inception year of auto internet finance in China. OEMs begin to leverage the internet finance products as a differentiator to promote new car sales. Internet companies utilize the existing credit check and big data tools to start the inventory financing and supply chain financing businesses. Auto internet finance, as a newly emerging trend, is expected to reshape the entire service process for China auto industry.