The history of China’s auto finance can be summarized as follows: “It was born early and became famous late”. Although auto finance has sprouting since 1995, the first auto finance company was not established until 2004, and relevant policies were issued four years later. The overall development speed of auto finance was gradually accelerated until 2014.
The collapse of the auto finance market
It is understood that the market size of auto finance is positively correlated with car ownership. China had just 140 cars per 1,000 people in 2017, compared with more than six times as many in the United States, according to think tank data. Although China’s car ownership is not high at present, the number of car sales is increasing year by year. According to the Automobile Circulation Association, the number of car sales in 2017 was 28.879 million, with a year-on-year growth of 3%. Although the market size of auto finance is also increasing year by year, there are still many chaos in the industry.
** Due to the late start of domestic auto finance and the lack of industry standards, there are chaos in the auto finance market, such as identity theft, vehicle cashing and multiple loans for one car. ** For example, car owners can use the same car to borrow money repeatedly on multiple platforms by taking advantage of the lack of information between different platforms. In addition to the lack of sound industry standards, the lack of personal credit system is also the reason for the frequent occurrence of fraud.
“Without a credit system, many institutions in China’s financial system look no different from pawnshops 100 or 200 years ago,” Ma once said. For example, the lack of a credit system will lead to the failure to confirm the credit value, which will lead to a cumbersome transaction process. A sound personal credit system is one of the driving forces for the development of auto finance. In the United States and other developed countries, a perfect personal credit system runs through all financial activities, simplifying the procedures and costs of financial activities. However, the credit system of China’s financial industry is still not perfect, resulting in the slow development of the whole industry.
The individual credit system needs to be built, the industry standard is lacking, and the industry fraud is frequent. All the signs indicate that the market environment of the auto finance industry is not optimistic.
How can there be eggs under the overlying nest? The road of auto finance is full of thorns
The weak market environment is the external reason for the difficult growth of auto finance enterprises, but there are also many problems to be solved.
First of all, capital demand is big, short – term difficult to have high returns. If the market environment is soil, that capital is the nutrient of enterprise growth. As a heavy asset industry, the financing demand of auto finance companies is very high. According to iResearch, there were 18 auto finance financing events in 2017, totaling more than 18 billion yuan. In addition, according to China Business Report in September 2017, the registered capital of BMW Auto Finance increased from 4.8 billion yuan to 9.8 billion yuan, and the amount of cooperation between Volkswagen Auto Finance and Citic Trust reached tens of billions of yuan.
Although the investment is high, it is difficult to achieve good returns in the short term. BMW automotive finance, for example, since 2018 has two bonds issued 3 billion yuan, in July 3 billion debt-financed will be used to support the operating funds, but I did not get screwed up so many Qian Yunying better earnings, according to the latest figures, BMW 2018 q1 financial quarter net profit is only 512 million yuan, plus the assets and liabilities structure is poor, Companies will continue to spend more than they earn in the short term.
** The reason why it is difficult to have high returns in the short term is that enterprises have no good profit model and single source of funds. ** For example, Chery Huiyin, which failed to go public, derives its revenue and earnings from the spread of its main business, retail loans, and is funded by borrowing from banks and other financial institutions. However, the spread income was not enough to balance the expenses, resulting in increasing liabilities of Chery Hui Bank. According to the prospectus of Chery Hui Bank from 2014 to 2016, its liabilities were 14.71 billion yuan, 17.78 billion yuan and 19.91 billion yuan respectively.
Secondly, risk control ability is not good, bad debt rate is high. The risk control ability is the protection shield for the development of the financial industry. However, the risk control ability of many domestic small enterprises is not good. With the increase of business volume, the bad debt rate is also increasing. The high bad debt rate is due to the technical level of small enterprises is not top, technical risk control ability is general, coupled with the lack of credit data, it is difficult to identify business risks. High bad debt rate and abnormal capital turnover have a huge impact on auto finance enterprises with high cost operation, which may lead to slow development or even normal operation of enterprises.
In 2017, there were nearly 300 auto finance companies in Shenzhen, but this year there are just over 100, according to iResearch. For example, “woshidai”, once one of the TOP50 train loan platforms, stopped operation in May this year because of the high bad debt rate, which led to unpredictable operating costs. For example, the four major investments at the height of their success were also due to the high bad debt rate (50 million bad debts), which led to the normal operation of enterprises and the whirlpool of clearing debts.
Finally, there is a lack of talent and a mature operation team. The speed of talent training in the auto finance industry is not equal to that of the market. Enterprises grow faster and more and more, but talent training needs a certain period of time, resulting in talent scarcity in all links. In addition, the auto finance industry starts late and teams are scarce, so the whole industry is in the stage of lack of talents. According to the statistics of China Auto Finance Laboratory, more than 80% of auto finance companies recruited in 2017, with vacancies in sales, risk control, management and other links, resulting in a serious shortage of talents. The lack of talents leads to the development of enterprises only in groping, which seriously hinders the rapid development of auto finance.
There are many platforms that fail due to immature operation teams, such as Xiqimao platform, which is due to the lack of experience and maturity of the entrepreneurial team, which adopts too aggressive strategies when expanding business and attacking the market, resulting in the collapse of the platform operation and had to stop operation. Volvo Auto Finance Company, which was acquired by Geely, is also poor in popularity and sales due to the lack of mature operation team.
** An enterprise without a mature team is like an army without a military adviser. It is not only difficult to make breakthroughs in development, but also difficult to maintain its position. ** SAIC-GMA Finance is a typical example. Although the scale of YIxin is far smaller than that of SAIC, it is higher than THAT of SAIC in the enterprise valuation in 2017. The difference between Yixin and SAIC lies in its mature team.
Auto finance ushered in favorable policies, auto finance how to seize the opportunity?
Looking at the development situation of the entire auto finance industry, although the market environment is not easy, and many enterprises themselves also face constant challenges, the prospect is promising from the perspective of favorable policies and market size.
On the one hand, policy support, the market gradually improved. Since 2016, favorable policies for auto finance have been issued one after another, such as Automobile Sales Management Method and Guidance on Increasing Financial Support for New Consumption Fields. The encouragement of favorable policies on auto finance gradually improves the auto finance field. Not only is the industry more and more standardized, but also the development environment is more conducive to the development of enterprises.
On the other hand, with the rapid growth of the auto market, there is considerable room for the development of auto finance in the future. One of the criteria for expanding the scale of the automobile market is the automobile sales volume. According to the data of China Automobile Distribution Association, from 2013 to 2017, the automobile sales volume in China rose from 21.9841 million to 28.8789 million, and showed an increasing trend year by year.
Car sales are rising, but the number of cars per thousand is still at a relatively low level. Data from Qianzhan Industry Research Institute shows that the number of cars per thousand is 834 in the United States, 711 in Italy, 599 in Britain and 611 in Japan, while the number in China is less than 200, and the penetration rate of auto finance in China is less than 40%. By contrast, China’s growth range is sufficient, and the auto market has a huge growth space. Deloitte data also estimates that the penetration rate of China’s auto finance will reach 50% in 2020, and the market size will reach 2 trillion yuan.
Under the two favorable factors of policy and market potential, the road ahead of the auto finance industry is undoubtedly bright. But baijindai, Juyoucai and other enterprises want to seize the opportunity to show their ambitions, but also need to start from their own, from the inside to the outside of the promotion.
First, expand business model and optimize revenue structure. Although the revenue problem caused by the single business cannot be eradicated at present, optimizing the revenue structure is also a way to alleviate it gradually. Chery Huiyin and other enterprises can solve their internal problems by expanding their business models to improve their income difficulties.
The post-80s and post-90s have gradually become the main consumers. Auto finance companies such as Chery Huiyin can capture the preferences of the new generation of consumers and provide a variety of financial products and services, such as short-term rental services in addition to fixed installment services. In addition, marketing with novel elements, such as short videos and pop-up stores, can also be added to attract consumers’ attention, so as to achieve the purpose of improving the revenue dilemma.
Second, deepen fintech capabilities or strengthen cooperation to enhance risk control capabilities. Risk control is the key link of enterprise development. Enterprises with poor risk control are just like having loopholes. No matter how much business volume and high bad debt rate, it is of no help, or even delay the development of enterprises. But risk control ability can not be achieved overnight, to solve the hidden problems need to be tailored to the actual problem.
For brilliance of east Asia has entered in the field of risk control, such as improved stage, financial support and technical strength is good, just need to further upgrade the risk control ability, can from the financial ability of science and technology, agriculture big data and artificial intelligence, to develop large data risk control and intelligent decision-making intelligent systems to increase efficiency and reduce the business risk control errors. For example, in the CAC platform of Jianyuan Capital, elements such as credit investigation interface and tripartite data are added to select high-quality users more quickly and provide corresponding financial schemes.
For baijindai and other enterprises lacking capital and technical strength, cooperation with banks or other enterprises is an efficient way to improve risk control ability. After cooperating with banks, such enterprises can make use of the bank’s credit investigation data and risk control system to carry out business operations and reduce the bad debt rate, such as the recent cooperation between Chang ‘an Company and Agricultural Bank of China. Cooperation with other financial companies can be mutually beneficial through cooperation to promote their own development and achieve a win-win situation, such as the cooperation between Jiangnan Financial Leasing and Baiqian Leasing.
Thirdly, cultivate the team and consolidate the talent barrier. Professional team is the sword of enterprise development, mature team is self-evident significance to the enterprise. However, due to the slow development of auto finance, the training of relevant talents is not enough. Only a few schools have auto finance major, the education system is not perfect, and there are not many training institutions in the market, so the supply of talents is obviously insufficient. For better development, enterprises need to cultivate professional teams and consolidate their own talent barriers.
Foreign auto finance industry is well developed and has rich talent reserve. It is a good way to introduce talents from the United States and other countries to train the internal personnel of enterprises. At the same time, we can also set up a special team building department to improve the talent strength of the enterprise through communication between the two sides. In this way, we can not only learn from foreign experience, but also combine with the local actual situation to cultivate more suitable talents and form the advantage of talent barrier.
In general, the development of China’s auto finance industry is relatively slow. However, with the continuous development of automobile economy and automobile market in recent years, auto finance is on the highway of development. Although there are still deficiencies in the current market environment and obstacles to the development of enterprises, the broad market prospect is full of opportunities for enterprises. Baijindai and other enterprises from their own point of view, constantly consolidate and enhance the technical strength and business ability, can take strength as a shield into a better future.
Article/Liu Kuang public account, ID: Liukuang110, this article first leek finance