Auto loan competition intensifies
People browse the car deals at a large international engine sale in Bangkok. New car sales are expected to propel the auto loan market this year. (Photo by Somchai Poomlard)
Competition from auto loans is expected to intensify as players join the segment, with new car sales helping to propel the auto loan market this year, a consumer finance company said.
Some of Thailand’s major auto loan providers have set targets for loan growth this year, in line with improving new car sales, which are expected to be between 800,000 and 810,000 units this year.
Krungsri Auto, an auto credit unit under the Bank of Ayudhya, and Kiatnakin Phatra Bank aim to grow their auto loans to 5% each in 2021, while Tisco Bank aims to grow its consumer loan portfolio from 2 to 3%.
Besides commercial banks, leasing companies have also entered this business segment, pushing the competition to a new high.
Krungthai Card Plc, an unsecured loan unit of Krungthai Bank (KTB), listed on SET, is in the process of acquiring a 75.05% stake in Krungthai Leasing Co Ltd from KTB, with the aim of expanding its financial services to cover guaranteed loan products.
Meanwhile, SET-listed Thai Group Holdings Plc, which offers a variety of financial services and is controlled by tycoon Charoen Sirivadhanabhakdi, plans to smoothly launch a digital car loan service in the third quarter as it expands to from its main activity of the automobile. Assurance.
Kittiya Srisanit, head of Krungsri Auto Group, said that the strong competition in the auto loan market this year is in line with new market players and expectations of improving domestic economic activities.
However, each loan service provider has their own business strategy, while the entry of newcomers would benefit consumers and the industry as a whole, she said.
In 2021, Krungsri Auto predicts that new car sales will gradually increase to 810,000 units.
In this scenario, the company expects to meet its auto loan growth target of 5% and control the non-performing loan (NPL) ratio for auto loans to a maximum of 2%.
Digitization is another key strategy to facilitate business growth. Krungsri Auto plans to continue to grow the auto loan ecosystem through a partnership strategy, both within and outside the auto industry.
“We saw further growth in auto loans through our digital platform worth 3.8 billion baht last year, up 10% year-on-year. With a more complete platform ecosystem and digital partners, we expect significant growth in our digital auto loans this year. “Ms. Kittiya said.
Krungsri Auto aims to bring outstanding auto loans to 448 billion baht this year, up from 428 billion recorded in 2020.
Sakchai Peechapat, chairman of Tisco Bank, said innovative products and quality of service will be the key to growing auto loans, rather than pricing. Given the low interest rates and narrower net interest margin of this business segment, the auto loan growth ratio is expected to be moderate this year, he said.
Partnering with automakers is the bank’s key strategy to facilitate the growth of auto loans this year, Sakchai said. Developing innovative products that meet customer demands amid the pandemic is another business strategy for the growth of auto loans, he said.
Despite establishing a marginal growth rate for its auto loan portfolio of 2-3% this year, Tisco Bank expects new auto loan bookings of 10-15%.