Institutional fierce battle commercial used car finance Ownership risk looms

Reporters Liu Ying and Zhang Rongwang reported from Beijing

The surge in entrants, the decline in sales, the manufacturer discount, the price reduction promotion... A series of chain reactions brought about by excessive competition have broken the original pattern of commercial vehicle finance. Nowadays, manufacturers' financial enterprises (manufacturers are auto finance companies and financial leasing companies) are suffering from the impact of tripartite financial institutions.

Liu Yue, head of Sany's auto finance business department, told China Business Daily: "Many of the funds of the tripartite financial enterprises represented by Ping An Leasing and Shiqiao Leasing are bank funds, and they adopt a rental loan cooperation model with banks, so their capital costs are comparable to banks." Although the overall capital cost of the manufacturer's financial enterprise is lower than that of the tripartite financial enterprise, after adding the cost of the dealer, the price finally given to the end customer is likely to be higher than that of the tripartite financial enterprise. "Under the existing model, the impact of tripartite financial institutions on manufacturers' finance is very large. According to a person familiar with the matter, what is more, some tripartite financial institutions continue to compress their own profit margins and continue to compress, and if they are not profitable, they must seize the market, which seriously disrupts the market environment.

In the face of the fierce attack of the three financial institutions, coupled with the decline in yields, the surge in risks and other issues, the era of manufacturers' financial "lying to win" has gone, and how to break through is already an imminent problem. Xie Shengli, deputy general manager of Xinhao Leasing, told reporters that most institutions in the industry have carried out commercial used car finance business, and this market has become a new favorite of the industry. If you want to find opportunities in commercial vehicle finance, manufacturer finance needs to break away from the inherent stereotype of "selling new cars for OEMs" and look for opportunities in the field of commercial used car finance.

Manufacturer finance "abandoned"

Once considered by the auto finance industry as a blue ocean market, commercial vehicle finance has now become a battlefield in the Red Sea, especially in the commercial vehicle new vehicle financial market, and the impact of tripartite finance on manufacturer finance is very large.

"The excessive number of entrants and the decline in commercial vehicle sales have led to excessive competition in commercial vehicle finance, and the original customers of some manufacturers' financial enterprises are being cannibalized by tripartite finance." This is the financial survival situation of manufacturers in Liu Yue's eyes.

"Manufacturers finance mainly adopts the model of dealer guarantee, and the price of funds given to dealers is about 6% to 7% per annum, and the price of dealers to end customers will increase by 3% to 4%. Therefore, the final cost of funds for customers is about 9% to 10% of the annualized interest rate. In contrast, since most of the three-party financial enterprises adopt a direct operation model, and the cooperation model of rent loans with banks, the cost of funds is about 5% to 6% of the annualized interest rate, and the final price of the customer can reach the annualized interest rate of 7.5% to 8% without a dealer. Liu Yue told reporters that in this case, the main engine factory is likely to "abandon" its own financial enterprises and choose tripartite financial enterprises such as Shiqiao Leasing, so as to ensure higher returns.

Previously, the reporter noted that there were financial leasing companies that launched down payment financing products.

According to the company's official micro introduction, down payment financing is a financial product that supports the realization of down payment financing installments on the basis of the normal financing repayment needs of the original customers, mainly for customers with insufficient down payment, hoping to enjoy high down payment and low interest rate products, and dealers making down payment advances for customers. The repayment start period of the principal of the product is selected by the customer, and only interest is repaid before the start period, and the maximum repayment period is supported by up to 12 installments. In addition to down payment financing, the company also handles freight loans, car insurance installments, vehicle loans and other businesses for customers.

In the view of Yang Nan, senior consultant of Beijing Jincheng Tongda Law Firm, if the same institution provides multiple loan services for the same customer at the same time, it may involve the problem of high financing and high loans. As the scale of the enterprise grows, the risk will become greater and greater in the later stage. As ordinary workers, commercial vehicle drivers are also discouraged by regulatory authorities from over-lending and unlimited leverage.

The above situation is not unique in the industry.

According to market participants, the pricing in the financial field of commercial vehicles is not clear, and sometimes the price of the car trademark is only the price of the vehicle chassis, and the carriage price is calculated separately. "According to national regulations, financial institutions can only lend according to 80% of the price of the car, but there is no clear price tag on the carriage in the commercial vehicle field, so the loan is only priced according to the chassis, and the loan amount can reach 130%."

Xie Shengli said that the reason why the past "financing + financing" model can be successful is that the basic logic of "down payment + margin" can recover the vehicle coverage loss after the risk occurs. However, the current industry pattern has changed, the demand for new cars has declined, and the residual value of second-hand cars has decreased, resulting in changes in the basic logic of commercial vehicle finance by controlling physical objects (car collection and disposal).

"In the future, commercial vehicle financial enterprises need to adjust the risk control model and assess business risks from multiple perspectives, including the policies and developments of different industries, the load capacity of vehicles and the areas of operation. At the same time, it is also necessary to examine the customer's credit report, flow, asset status, etc. In addition, the qualification, supply and strength of the channel are also issues that need to be considered. Xie Shengli told reporters.

"Manufacturer discounts, price reduction promotions lead to the industry's internal roll, coupled with the industry into a downward adjustment period, the risk brought about by the phenomenon of high financing and high loans that prevailed in the industry has emerged, and the new entrants to commercial vehicle finance have retreated." Xie Shengli said.

Commercial used car finance is swarming

In the case of the overall downturn of the commercial vehicle industry, the participants in commercial vehicle finance are also facing the problems of declining yields and surging risks. In this context, both manufacturer finance and third-party finance have begun to deepen their business into the field of commercial used car finance.

According to public data, as of the first half of 2021, the number of commercial vehicle trucks exceeded 32 million, and the number of heavy trucks exceeded 7 million. In addition, the ratio of used car trading volume to new car trading volume in developed countries is 1.5:1, and the ratio of used car trading volume in China to new car trading volume is 0.6:1.

From the perspective of demand, Xie Shengli pointed out that the transformation trend of commercial vehicle finance from the incremental business of new cars to the existing business of used cars and aftermarkets is obvious, and the potential market scale of used car transactions is huge. At the same time, freight rates are constantly decreasing, the revenue space of logistics and transportation is constantly compressing, and lower-priced used cars have become the choice of more and more drivers.

From the policy level, Xie Shengli pointed out that the state continues to promote the development of the second-hand car business. In second-hand car transactions, the value-added tax point is reduced from 2% to 0.5%; the transaction price is more transparent and reasonable; the "Provisions on Compulsory Scrapping Standards for Motor Vehicles" and the "Measures for the Management of The Circulation of Used Vehicles" are promulgated, which make clearer provisions on the scrapping of used cars and lay a foundation for a stable market.

In addition, Liu Yue told reporters that the terminal price of the commercial second-hand car finance field is about 14% to 17% of the annualized interest rate, compared with the terminal price of only 7.5% to 10% of the annualized interest rate of the new car finance field, there is still a large profit margin.

According to Xie Shengli, at present, dozens of auto financial institutions such as Shiqiao Leasing, Ping An Leasing, Minsheng Golden Leasing, FAW Leasing, CRRC Xinrong, Xingbang Golden Leasing, xinhao Leasing have carried out commercial second-hand car finance business, of which Shiqiao Leasing's business is relatively large.

Liu Yue told reporters that Shiqiao Leasing's market share in the field of commercial second-hand car finance is about 70% to 80%, which is currently the largest commercial second-hand car finance enterprise in the industry. Shiqiao Leasing's commercial used car finance business started earlier, and the reason for its initial layout of the business was due to the formation of a certain scale of its new car finance, which foresaw the bad debt risk that may occur in the new car finance, and covered the risk by laying out commercial used car finance and increasing the number of commercial vehicle transactions.

On the official website, Shiqiao Leasing's evaluation of its commercial used car business is that the disposal efficiency of old cars is high, the integration of new car financial products, the growth of new cars, and the promotion of circular consumption; the rapid return of funds, the sale of funds while opening and not depositing, the whole process of custody services, accurate pricing to reduce losses; the assessment of accurate pricing, the centralized bidding of the platform, the efficient realization of non-performing assets, and the help of financial institutions to stop losses in a timely manner.

In Xie Shengli's view, Shiqiao Leasing has been rooted in the industry for many years, with massive data precipitation, and has obvious advantages in this field. Other institutions involved in this field started late, but in the downward stage of the industry, commercial used car finance has become an important part of its business strategy.

In addition, Liu Yue told reporters that there are still hidden risks in the financial field of commercial second-hand cars. "As an individual, the driver of a commercial vehicle does not have the authority to apply for a road transport permit, so he can only attach the car to the logistics company, and the ownership of the vehicle is the logistics company."

Liu Yue pointed out that due to the current downturn in the entire logistics industry, drivers and logistics companies will be relatively tight in funds, so there will be logistics companies through second-hand car transactions to carry out operating loans, and commercial vehicle financial enterprises can not distinguish whether this is the needs of drivers or logistics companies, if the logistics company has future operational problems, according to the agreement between logistics companies and commercial vehicle drivers, the arrears need to be repaid by the actual holder of the vehicle Commercial vehicle drivers, which invisibly lays a hidden risk for the industry. "Nowadays, the profit margin of commercial second-hand car finance can still cover such risks, but in the future, with the increase of entrants, the decline in yields like new car finance is a foreseeable trend, then the above risks will become a 'minefield' for commercial vehicle financial enterprises to operate."