China emergency financing of auto finance

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Issued on 10 Mar 20

20 billion yuan in emergency financing of auto finance. Who can survive the winter in the faculty, bank, and internet departments? 2019 is a difficult year for the automotive industry, but industry insiders generally expect that after deep adjustments in 2019, the automotive industry will generally stabilize in 2020., but never expected that the sudden COVID-19 disrupted the pace of industry recovery.

Affected equally, there is also the auto finance industry, which is dependent on car sales. According to incomplete statistics from the consumer industry, as of now, the newly issued auto finance ABS and financial bonds in 2020 have reached nearly 20 billion yuan. Behind this data, the debt ratio of auto finance companies is rising.

First look at the data of a group of automobile associations. In January 2020 alone, automobile production and sales dropped by 33.5% and 27.0% month-on-month, respectively, and decreased by 24.6% and 18.0% year-on-year.

In Hubei, where the epidemic is most serious, automobile production accounts for about 8% -9% of the country's total. Guangdong and Zhejiang, which have more severe epidemics, are also major provinces in the automotive industry.

Regarding the impact of the new crown epidemic on the automotive industry, some analysts believe that after the epidemic has passed, there will be a wave of retaliatory growth in suppressed car purchase demand, but some industry insiders have told the consumer industry that the automotive industry has not really come from the trough. Going out, if consumers ’income is impacted too much, and spending power cannot be restored in a short time, then the demand for cars will not return so quickly, and the trend in the whole year of 2020 will be less optimistic.

For auto finance, which is highly dependent on car sales, the impact has also been severe.

One practitioner told the consumer industry that the most direct thing is definitely the decline in sales and the decrease in business volume. The competition was originally fierce, and it is even more difficult to get customers now. The second is the decline in asset quality. The epidemic has spread to all walks of life. The decline in revenue will definitely affect customers' ability to repay, and the overdue and non-performing rate will rise.

In the auto finance industry, manufacturers of auto finance companies rely on manufacturers to have product and channel advantages. Because banks are big capitalists, the auto finance business has the advantage of loan interest rates, while the Internet auto finance company has the advantage of acquiring customers. It has also won a share of the money through the “rental purchasing” model.

Whether it is a manufacturer-, bank-, or internet-based auto finance company, it has its own comparative advantages in business and has its own development model.

But in the face of the new crown epidemic, they have been hit by "no difference".

Deteriorating asset quality and increasing funding pressure

According to the statistics of the consumer industry, in 2019, the top six auto finance companies that issued ABS were BMW Auto Finance, SAIC General Motors Finance, Dongfeng Nissan Auto Finance, Chery Huiyin Auto Finance, Jizhi Auto Finance, Tianjin Great Wall Binyin Auto Finance. Among them, BMW Automotive Finance issued a total of 21.5 billion yuan, SAIC-GM Automotive Finance 20 billion yuan, Dongfeng Nissan Automotive Finance 15.09 billion yuan.

At the beginning of 2020, BMW Finance, SAIC General Motors Finance, Dongfeng Nissan Automotive Finance, and Great Wall Binyin Automotive Finance issued ABS and financial bonds. Behind this is the growing financial pressure on manufacturers' auto finance companies.

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