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Research on the Development and Strategy of China Automotive Financial Services

Author: HuShaoHang
Tutor: LiJunJiang
School: Jilin University
Course: National Economics
Keywords: Auto Finance Profit model System
CLC: F832.2
Type: Master's thesis
Year: 2010
Downloads: 298
Quote: 0
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Abstract

Automotive Financial Service is a booming industry in China, and also the auto industry is gradually growing up with the world economy globalization and financial globalization. In the contemporary international economic circumstance, the world automotive financial services industry is also facing great challenges of the financial crisis. However, overall our market economy maintained steady growth under the domestic market environment, how to choose strategies to China’s automobile finance industry, is it a challenge or an opportunity, yet become a puzzle issue in front of us. From a perspective of the worldwide, the majority of the countries have no interest in or a small profit of saturation in the automotive market, but China’s auto market is still a "delicacies”. With the rapid growth of our economic, it often occurs a phenomenon that the automotive industry is short for supply and order, domestic manufacturers have increased productivity, competing for the lucrative market with international automobile manufacturers .Up to 2008, car loan balances of the four major commercial banks have been more than 150 billion yuan.We can clearly see that the promote function of automotive financial services is huge to our car industry and even the entire national economy , so it is necessary for is to develop automotive financial services so that we could enlarge and strengthen China’s automobile industry.Firstly, facing the great challenges from international auto companies, it is unavoidable that merger or joint auto financial services company will as a result of international auto companies divide up the domestic market. At present foreign auto manufacturers and auto finance service institutions have attained trade and distribution rights in china. They have already begun screening vehicles in the domestic to find retailers and financial institutions, and act as agent of their products or services in China. At present, China’s automotive financial services companies and foreign competition will be a sustained and long-term struggle, which may lead to small-scale, low-impact resistance, low-tech the car manufacturers were forced to launch the industry, and even large corporate acquisition. In response to this challenge, our domestic auto manufacturers should be based on actual demand to adjust strategies, make research and development on the small car market, tailor-made for the majority of consumers in the low-end displacement of small, low cost, comfort and safety products, allay financial services body to carry out auto finance services, which not only conducive to China’s survival and profitability of auto manufacturers, also played the "invisible hand" role of the market economy in promoting the development of the auto financial services industry.Secondly, China’s auto industry is different from the developed countries, mainly showing a large-scale multi-sector investment in cutting production chain development, automotive financial services is a specialized service industries of the financial sector directivity, it is reflected on the national economy driving function by driving-related industries and promoting employment. In the national economy, auto finance operation is used as effective means to drive domestic demand stimulate consumption, and to further adjust the imbalance contradictions between supply and demand in commodities market, it is conducive to China’s auto finance market stability and orderly growth. In the current world financial market, every market economy system has a comprehensive system protection, market economic agents based on individual and corporate financial services company have emerged gradually, and automotive finance could promote both the further development and improvement. The main parties’interests should be secured and orderly market order has been maintained, enhance the advantages of auto finance services, promote the entire financial market effective policy guidance and system safeguards.Moreover, from the above analysis, it is clear that the profitable models of our auto finance services are inadequate. Auto Finance started late in China, leading to the weak foundation of the automotive industry. Layers in the industry chain mainly out of touch, as dealers take over more profits from auto manufacturers which lessen the capital investment in production, and automotive financial services lack financial support. Our after-sales business are decentralization, they can not form an orderly competitive market and also are not conducive to the information concentrated in the auto finance industry abroad which reveal the characteristics of economies of scope, there are a variety of automotive financial products for consumers. By contrast to China’s auto finance market is still in its early stages, lacking interest rate flexibility and influence by the heavy impact of interest rate market. Solely service and lack of competition, bank-led economic profit model violates free competition in the market economy on the operating principles, some of the planned economy and the monopolistic presence, all stakeholders motivate their behaviors by their values pursing in this system, in the disorder and a lack of competition restraint mechanism of automotive market, they can not meet the requirements of automotive financial services industry. According to foreign countries which have taken the value-added profit model, we can reflect on the many problems currently we are facing to, and thus better to explore China’s development model.Finally, I have put forward to some suggestions for the automobile financial services according to the above analysis. Our primary task is to establish a sound and effective credit management system and is also the main assignment of China’s auto finance business development, in order to avoid the risk of personal credit bad loans caused by the emergence of this initiative, it must implemented as soon as possible. China’s credit rating standards is in the initial exploration stage at present, which often review the borrower’s qualifications in a simple but not necessarily safe way. Establish a comprehensive personal management system in a variety of car loans which could increase the risk prevention mechanism and effective control of credit risk through the reference for the credit system in developed countries. in the establishment of consumer credit management system in China, to fully take into account the actual current situation and the possible impact on the future cause, as benefit from the experience of others, we should also based on the national conditions and the stable development of my economic goal.In this paper, by reference to and analysis on the domestic and foreign profit model, combining with the status of the automotive financial system in our country, I put forward some proposals for seeking to establish a market environment with fair, just and orderly, and also find a way for the transformation of government functions which could promote a development of the automotive financial services industry. We should correctly handle the relationship between the interests of every subject, established an unique system of Chinese automotive financial services under the new situation in the global economy, and play a positive role for the prosperity of China’s economic.

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