SHANGHAI — Regardless of the global tariff war, Chinese automotive financing executives are looking to work with their counterparts around the world, especially in the United States.
That was the undercurrent truth to come out of the inaugural Auto Finance Summit Asia here today.
The U.S. executives repeatedly said the same thing: If there are opportunities for partnership or investment, let us know. And the Chinese executives reiterated the opportunity in China.
“The auto finance penetration rate in China is about 5%, while it is around 80% in the U.S.,” said Gan Haifen, chief financial officer of Pioneer Taimeng Finance & Leasing Co., a finance provider in China. “In terms of penetration rate, the potential is huge.”
The reality is that auto finance is far from being an international industry today. Even the captive units of multinational OEMs invariably operate with localized, geographically isolated operations. The reason is likely a result of complex, idiosyncratic legacy regulatory compliance issues, but technology now appears to allow for more seamless globally oriented operations.
A more international auto financing industry is becoming a necessity, when considering the razor-thin margins in the U.S. market, for example. China — the world’s largest automotive market, with a current SAAR of 28.4 million new units — and the U.S. — with a 16.8 million SAAR — will facilitate globalization of the auto finance industry.
“I have been operating in China five or six years now, and I am so confident about this country, about its people, about how the government makes things happen,” said George Leondis, president of Dongfeng Nissan Auto Finance Co., Nissan’s captive in China.
Around 12 million used vehicles are sold annually in China. In the U.S., there were 39.2 million used vehicles sold last year, according to Edmunds.
Many customers in China are first-time buyers. For Nissan’s entry-level brand in China, that ratio is about 75%. The purchasers have never even had a driver’s license before, let alone do they understand financing, Leondis said.
“The OEMs have not done much to cultivate loyalty until today,” he said. “But the growth in the China car market has slowed.”
That slowdown has caused OEMs to think more about their customer networks, and that, in turn, has auto finance companies in China considering ways to cultivate loyalty. This is yet another factor that could precipitate more global orientation for the auto finance business in China.
But the Chinese want more cars, and OEMs here are marketing aggressively, using American movie stars like Brad Pitt and George Clooney to promote their brands. The goal: build demand.
“I think this industry [in China] can get to 70% penetration in two to three years, and that is huge growth, huge growth,” Leondis said.