Philippines Auto Finance Market Overview And Size
Analysts at Ken Research in their latest publication “Philippines Auto Finance Market Outlook to 2024- Growing Prominence of Captive Finance and Surge in Used Car Sales Supporting Disbursement for Auto Loans” believe that the market demand is likely to follow a growth trend in the near future due to a forthcoming increase in used cars sales and a shift towards newer models of mobility such as car sharing and leasing, which will in turn help the economy grow as well. The Report provides a comprehensive analysis of Philippines’ auto finance market including market evolution, market overview, market genesis, and Market size and market segmentations. Extensive focus has been placed in quantifying the auto credit disbursed auto loans outstanding and number of vehicles financed. The report covers aspects such as market segmentation (by loan tenure, type of vehicles, new and used cars and type of institutions) and snapshot on general automotive space in Philippines Some positive factors expected to impact the market are the influx of digitization based lending models (introduction of fin-tech products), the spread of customized loan products and a further rise in the penetration rate of banks and Non Bank finance. The market is anticipated to register a positive CAGR of 9.0% in terms of credit disbursed and 8.1% in terms of total loan outstanding during the forecasted period 2019P-2024F.
Philippines Auto Finance Market Overview And Size
Market Overview: The auto finance market has played an imperative role in the overall GDP (Constant Prices) contribution in the Philippine economy with a value contribution of more than 25% in terms of auto loan outstanding by the end of 2019 (Provisional). The Auto Finance Market in Philippines is fairly new and has not been able to penetrate the country. There is a lack of knowledge and awareness in the country which leads to the problem of people opting for cash purchases, in place of finance payments.
Major operations are conducted by two types of entities namely, Banks & Subsidiaries and Non Bank Financial Institutes. The only captive finance working in the country is Toyota Financial Services Philippines and other than that there is a lack of Captive finance institutions.
Philippines auto finance market size in terms of auto loan outstanding increased with a double digit CAGR during the same period. The growth factors include lowering lending rates, growth in new & used car sales, expanding household population and higher demand in the urban regions along with progressive technological advancements being mandated by the government and the adoption of digitalization by all major financial institutions in the country. Two-wheelers market witnessed growth with the rise in motorcycle fueled by the huge demand by small industry workers and rural business. Constant prime lending rates, growing car sales and evolving used car market have been the major push factors.
By Type of Vehicles Financed: Market segmentation is done on the basis of sales of type of Vehicle financed. It was observed that out of total vehicle financed, new Automobiles capture highest share of the market in 2019P, while used Automobile capture of the overall financed vehicle, and motorcycle captured rest share in terms of units.
By Banks and Non Banks: Philippines Auto finance market is largely governed by Banks and banking segment of the market amounted to the overall market. Non banking sector amounted to remaining the market in terms of Auto loan outstanding.
By Banks on the basis of Auto Loans and Motorcycle Loans: In Philippines, it is witnessed that the banks majorly focus upon providing loans to the Automobile segment rather than motorcycle segment. Due to this, auto loan segment of the bank captured highest share of the market and Motorcycle loan amounted to rest of the overall market.
By Non Banks on the basis of Auto Loans and Motorcycle Loans: In Philippines, Non Banking segment do not have a lot of capital and deep pockets, hence they majorly focus on providing loans for Used Automobiles and for motorcycle, as they have lower average price..
By Type of Banking Institutions: There are majorly two types of Banking Institutions in Philippines; Commercial and Thrift banking systems. Commercial banks are big and govern largest share of the banking segment of the market and thrift banking system amounted to rest of the banks share in the market.
By Tenure of Loan: In Philippines Auto Finance Market, the Tenure of loan for New Vehicles is divided in 5 sections; 1 Year Loan period amounts to the lowest share on the basis of Auto Loan Disbursement for New Vehicle while remaining share is given to the 0-5 year or more tenure period amounts to the maximum share. For Used cars, the most favorable tenure is said to be for 3 years or more.
By Sales Registration: In Philippines, we witness that NCR region, have the highest value of sales registration and approximately highest of the total vehicles are registered in this area.
Compeititive Landscape Of Philippines Auto Finance Market
The overall competition nature has been fragmented owing to large size of other players in the market. The top 5 entities capture over 50% of the total auto loan outstanding in the banking sector in 2019P. Banks have been the dominant entity in 2019P. Although there are approximately ~entities involved in extending auto finance in Philippines, the market is dominated by banks in terms of auto loans extended owing to low cost of financing and high trust factor associated with their organized & stable business structures. In 2019P, there were 6 major banks namely Metrobank, BDO Unibank, Eastwest Bank, Bank of Philippine Island, Rizal Corporation and Maybank.
The overall competition nature has been highly concentrated owing to major market share captured by 3 big players namely, Toyota Financial Services Philippines Corporation (TFSPH), Unistar Credit & Finance Corporation and Radio Wealth finance Company. Similar scenario has been observed for the year 2019P. The Largest player in this category is TFSPH.
Competing Parameters: These entities majorly compete on the basis of diversification of services; interest rates charged, expanded distribution network & regional presence and enhanced customer relationship. One of the chief competing parameter is digitalization that has completely changed the market along with major strategies used to attract customers & expand business including Cash Your Car and others.
Philippines Auto Finance Market Future Outlook
Future Growth Prospects: Philippines auto finance market is likely to witness a boom in terms of auto loan outstanding, credit disbursed and number of vehicles financed especially owing to fast pace developments on the technological front with the development of the Eastern Economic Corridor (EEC). Furthermore, the inclusion of many Japanese Auto makers is also supposed to act like a catalyst for the growth. This is expected to increase the number of total vehicles financed in the country. Customers would witness new schemes in the market focusing primarily on customers friendly outlook and enable customers to operate auto loans financial services from home, without any hassle. Moreover, rise in commercial activities engaging automobiles, such as use of vehicles in public transport, agricultural and industrial use, are expected be the potential prospects of growth in the next five years.