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
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