What is the Current
Potential of Vietnam Auto Finance Market?
Vietnam
auto finance market has been identified at a growth stage with a
growing appetite for passenger and commercial vehicles. The auto finance market
has increased to VND ~ trillion in 2018 from VND ~ trillion in 2014 registering
a CAGR of ~% during this period. The market is concentrated with fierce
competition among auto financing institutions. Majority of credit institutions
are located in Hanoi and Ho Chi Minh City, in the northern and southern regions
of the Vietnam, as they are the financial and economical hubs of the country.
However, the banks and consumer financing companies are projected to develop
their presence in the tier 2 cities of the country such as Hai Phong, Da Nang
and Bien Hoa s as to expand their customer base. The customers taking hire
purchase loans comprise of large scale customers and retail customers. VAMA’s compiles
statistical data and issuing publications for this industry.
The
auto loans outstanding have increased from VND ~ trillion in 2014 to VND ~
trillion in 2018. The number of new automobiles financed increased from ~ in
2014 to ~ in 2018. The auto finance penetration rates for new cars have
increased from ~% in 2014 to ~% in 2018 as a result of the above growth factors
in the market. Tien Phong Bank has
partnered with car showrooms and dealers. Its loan product is also user
friendly, has a quick turnaround time and offers a competitive interest rate.
Saigon Hanoi Bank has partnered with Truong Hai Auto Company, which holds the
largest share in Vietnam’s automobile market and offers varied collaterals and
loan amounts up to ~% of the car’s value.The major restraining factors of the
market have been low geographical presence, high non-performing loans,
increasing price competition, and high operating costs as a result of
digitalization.
What is the
General value chain in Auto Finance market?
Banks
in Vietnam acquire their clients through multi brand dealerships, original
equipment manufacturer (OEM) showrooms (Truong auto, Toyota) and car sharing
services (Uber, Grab and Others). The banks conduct a thorough screening
process and required documents such as house registration, proof of income,
identity proof, car purchase contract and the application of the car loan.
Finance institutions quote an interest rate to dealers known as the buy rate.
Customers approved for a loan at dealerships and showrooms are quoted an
interest rate that can be higher than the buy rate and the dealer keeps the
additional interest charged. The dealers are also offered an incentive from
various banks for the referral of new customers to their financing institution
for auto loans. This incentive is generally in the range of ~% of the interest
charged to the customer.Cab Sharing services such as Uber and Grab purchase
vehicles in bulk through the OEMs such as Toyota and Hyundai. Since these
companies procure a large quantity of vehicles in one transaction, they are
offered a discount rate of ~% by the OEMs. Consumer financing companies are
rapidly growing in Vietnam by focusing on the low income segment of the
population, below a VND ~ million monthly salaries. These companies such HD
Saison and TFS compete aggressively by offering interest rates below ~% and
loan approvals within ~ minutes with minimal documentation.The primary source
for auto financing in Vietnam takes place in banks, accounting for almost ~% of
the market in terms of transactions.
What are
the market segmentations in Vietnam Auto Finance market?
By Type of Vehicles: On the
basis of credit disbursed for light commercial vehicles registered a CAGR of
close to ~% during 2014-2018 comprising of minor share in 2018. On the basis of
auto loan outstanding, passenger vehicle recorded a CAGR above ~% while
commercial vehicles experienced a CAGR of above ~%. Commercial vehicle finance
has led the space by capturing a share of over ~% in 2018. This continuous
increase in demand for passenger vehicles can be attributed to the rising GDP
per capita in Vietnam along with improvements in infrastructure, and the growth
in social status from the ownership of a car.
By Type of Institutions: By auto
loan outstanding, banks & subsidiaries have led the market capturing almost
~% of market share in 2018 with their stable financial structures and high
trust factor associated with the provision of their services. A very minimal
proportion was captured by NBFIs. Captives and independent consumer finance
companies in Vietnam also form part of this segment.
By Loan Tenure: On the
basis of auto loan outstanding, 5 year loan tenure has been the most popular
one capturing more than ~% market share in 2018. This was followed by 4 year
loan tenure and 3 year tenure respectively. Short term loans have been less
popular hence 2 year and 1 year loan tenures have comprised of a very small
share in the market. The low average monthly income leads to customers opting
for longer loan tenures as they can afford the lower monthly payments.
What is the state of the competitive
landscape in Vietnam Auto Finance market?
The
market players are separated into two main categories, that of banks and non
banking financial institutions (captive finance companies play a very minimal
role in Vietnam’s auto finance industry). Each entity caters to a specific
segment of the market, such as passenger cars, commercial vehicles, motorbikes
and others. The overall competition
stage of the market is fragmented due to the large number of institutions, over
~ players, operating in the market. The vast majority of auto financing occurs
in banks (~%), although there is an increasing shift to non-banking financial
institutions in recent years as they offer lower interest rates, quicker
approvals and a simple documentation procedure.Cars in Vietnam are ~% costlier
as compared to other regional countries such as Thailand and Indonesia. This is
due to a special consumption tax, value added tax and registration fees and has
restricted the market for auto financing as it lowers the segment of population
that can afford a vehicle. Major banks include Vietnam International Bank (VIB),
Tien Phong Bank (TPBank), Techcom Bank, Sacom andBank for Investment and
Development of Vietnam (BIDV). Banks and Non-banks alike are competing on
interest charged, which is a major competing parameter as customers are attracted
to low rates.The institutions compete by offering specialized services and
schemes that are customer centric. Banks have eased loan application turnaround
times, with many banks appraising loans within 8 hours. Companies are focusing
on expanding their business to capture a larger customer base and increase
their brand recognition.
Key Segments Covered:-
By
Type of Vehicles (Passenger Vehicles and Commercial Vehicles on the basis of
Credit Disbursed and Auto Loan Outstanding)
By
Type of Institutions (Banks & Subsidiaries and Non-Bank Financial
Institutes on the Basis of Credit Disbursement)
By
Loan Tenure (1 Year, 2 Years, 3 Years, 4 Years, 5 and More years on the basis
of Volume of Vehicles sold in 2018)
Key Target Audience:-
Existing
Auto Finance Companies
Banks
& Subsidiaries
Captive
Finance Companies
Non
Banking Financial Institutions
New
Market Entrants
Automobile
Financing Companies
Government
Organizations
Investors
Automobile
Associations
Automobile
Original Equipment Manufacturer
Time Period Captured in the Report:-
Financial
Year 2014-2018: Historical Period
Financial
Year 2019-2024: Future Forecast
Key Target
Audience:-
Existing
Auto Finance Companies
New
Market Entrants
Government
bodies
Investors
Automobile
Manufacturers
Automobile
Associations
Auto
parts Equipment Manufacturer
Companies Cited in the Report:-
Banks & Subsidiaries
Tien Phong Bank
Vietcom Bank
Sacom Bank
Vietin Bank
Shinhan Bank Vietnam
Saigon Hanoi Bank
Techcom Bank
Vietnam International Bank
Bank for Investment and Development of
Vietnam
Non-Banking Financial Institutions:-
BMW
Financial Services
HD
Saison Finance Company
Daimler
Finance
Toyota
Financial Services Vietnam Company Limited
To know more,
click on the link below:-
Related Reports By Ken Research:-
Ken Research
Ankur Gupta, Head Marketing & Communications
ankur@kenresearch.com
+91-9015378249
