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Mired in Losses, Auto Dealers Struggle to Take Advantage of Automotive Finance

Date:06-07 11:09 Source:The Economic Observer Authour:Liu Junjing

At present, however, customers are less than satisfied because the services provided by auto finance companies in China to auto dealers have not reached the level of mature markets like Europe and North America. There are two big obstacles to customer satisfaction in inventory financing for new cars: the banks are slow to grant loans and the funds available are not enough to support capital turnover.

 

Mired in Losses, Auto Dealers Struggle to Take Advantage of Automotive Finance

 

The banks are slow to grant loans and the funds available are not enough to support capital turnover.

As auto sales slow down, auto dealers are coming under increasing pressure on their profits. J.D. Power statistics show that 61% of auto dealers made a profit in 2008, down to44% in2014. In 2015, the situation barely improved with 50% of dealers still making losses.

Slight growth is now the new normal in the Chinese auto market. Against this backdrop, an increasing number of auto dealers are turning away from pre-sales service, looking for new profit sources in after-services and finance, as well as forming alliances to have a stronger say in the dialog with auto makers. Showing plenty of inspiration and space for growth, the auto finance market is becoming ever more attractive to car companies, auto dealers, and other players in the industry.

“In the past few years, the strategic importance of auto finance has continued to rise. We (BMW) want to help our customers to realize their dreams. One way to help them realize their dreams is to provide tailor-made financial products, and the other way is to apply advanced digital technology. It is essential for us in the future to enhance the quality of service, expand relevant channels, gain access to our customers, and meet their needs in China.” So said Uwe Stadtler, CEO of BMW Auto Finance China in an interview.

At present, however, customers are less than satisfied because the services provided by auto finance companies in China to auto dealers have not reached the level of mature markets like Europe and North America. There are two big obstacles to customer satisfaction in inventory financing for new cars: the banks are slow to grant loans and the funds available are not enough to support capital turnover.

It usually takes 2 days in the US auto market to grant a loan, while an average of 3.2 days is needed in the Chinese market. Currently, more than half of financial institutions in the US market have adopted automated approval processes. In contrast, it takes an average of 2.4 days in China to get an approval. Uwe Stadtler commented on this issue: “The Chinese auto market has developed very rapidly in the past five to six years and has grown into the largest auto market in the world. This massive, diversified and fast-changing market poses a challenge to auto finance companies.”

In the future, the auto finance industry will develop in leaps and bounds. Customers will require more innovative auto financial services, involving areas such as car sharing, car rental, and financial leasing. “Stable, accurate and concrete” improvements in inventory financing for new cars, specifically accelerating the speed of granting loans and increase the funds available to support capital turnover, will have a direct impact on customer satisfaction, and ultimately determine the survival and development of enterprises in the auto finance industry.


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