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China Focus: Financial institutions make foray into auto finance market

2015-01-13 GMT+8:00

BEIJING, Jan. 12 (Xinhua) -- Various financial institutions are targeting at Chinese auto finance market, which is expected to keep an annual growth of 5-10 percent in the next ten years.

Analysts forecast that the market will grow to over one trillion yuan from the current 670 billion yuan, thanks to continuing increases in automobile inventory, production and sales in China.

According to a white paper by Deloitte and China CITIC Bank, auto seller groups that are expanding businesses mostly concentrate their funds on capacity expansion and diversified operations, in a bid to lift market share, reduce operation risks and build competitive positions on regional markets.

Meanwhile, auto seller groups that are transforming business structures usually inject funds into routine operations, such as the acquisition of in-stock cars, demo cars and parts.

Both kinds of auto sellers raise money via bank loans, auto makers' financial companies, IPO and bonds.

A bank industry insider says commercial banks have an absolute advantage in the field of auto finance at present, as they can provide financial services for the entire industrial chain. As for auto sellers, the commercial banks provide loans for in-stock car acquisition, new store construction and liquidity.

Deloitte's partner Liu Wei says banks will strengthen financial supports to quality auto sellers to consolidate the traditional cooperation between the bank industry and auto circulation industry and boost the healthy development of auto finance industry.

Internet finance companies, however, are challenging banks in this regard. Many of them have established Internet finance platforms for the automobile circulation chain, such as The platform's CEO Wang Chuanyi says Internet finance companies will finally take a big piece of pie from the market in the future, as they can provide specialized and fine-grained auto finance services.

But industry insiders believe that Internet finance companies would not take over banks' dominated position in the short time, and offline financial channels will continue guiding the industry's development.

Li Yong with China CITIC Bank says the main rivals of commercial banks on the market are the financial institutions that are also from the bank industry, such as auto finance companies. He predicts that banks will remain as the main source of auto inventory financing and auto consumption credits, though auto finance companies will have higher proportion of business scale on the market.

The white paper says China's auto industry has as high as three trillion yuan of industrial value, which keeps an average annual growth of about 10 percent. The financial institutions need to strengthen cooperation with auto seller groups to provide more beneficial products, better services and more convenient transaction platforms to support the auto sellers' development.    (Edited by Li Xiaoyu,