China Poised to 'Leapfrog' Leasing In Favor of Subscriptions | Auto Finance News | Auto Finance News

China Poised to ‘Leapfrog’ Leasing In Favor of Subscriptions

© Can Stock Photo / philipus

SHANGHAI — Much in the same way the Chinese economy has bypassed widespread usage of credit cards in favor of mobile payments such as WeChat, there is speculation that Chinese auto lenders could “leapfrog” traditional leasing in favor of subscription models, Sebastian Pfeifle, a partner at Deloitte, said at the Auto Finance Summit Asia.

Leasing remains a tiny portion of overall car sales in China with just 0.1% penetration of what western markets would consider leasing, according to a study.

“We have technological capabilities online and with smartphones today that enable flexible ownership models,” Pfeifle said. “In many markets (the U.S. and Europe), the transition from full ownership usage was leasing, and [In China] I’m not sure you will need leasing at all in a broad sense, or if leasing will become more of a short-term usage.”

On the other hand, financing generally is starting to gain traction in the country, said George Leondis, president of Dongfeng Nissan Auto Finance Co.

Three years ago, dealers were making 15% of their profits from financing and today they’ve doubled that to 30%, he said. Financing benefits the OEM he argued because interest rate incentives are better for the long-term value of the car and the brand than cash on the hood.

Consumers should like it as well because it frees up more cash, and OEMs need to do a better job of promoting it online, he said.

“You may go to an OEM site in China, and you may not even see a lead to the finance site. Meanwhile, if you go to a North American site it’s all on display,” he said. “What an opportunity to present to the customer what they want.”

Captives are likely to drive advancements in the space moving forward, Pfeifle said. “I believe the growth will come more from the rural areas, more use of mobility models, and more efficient usage of the asset,” he said. “This can mean fewer cars or at least more efficient use of the cars — but more cars on the road? Probably not.”

  Like This Post