Auto loan competition ramped up

Auto loan competition ramped up

People browse car deals at a Bangkok International Grand Motor Sale. New car sales are expected to propel the auto loan market this year. (Photo by Somchai Poomlard)
People browse car deals at a Bangkok International Grand Motor Sale. New car sales are expected to propel the auto loan market this year. (Photo by Somchai Poomlard)

Auto loan competition is expected to intensify as players joined the segment, with new car sales helping to propel the auto loan market this year, says a consumer loan firm.

Some of Thailand's leading auto loan providers set loan growth targets this year in line with improvements in new car sales, expected to be around 800,000 to 810,000 units this year.

Krungsri Auto, a car loan unit under Bank of Ayudhya, and Kiatnakin Phatra Bank target their auto loan growth at 5% each in 2021, while Tisco Bank aims to grow its consumer loan portfolio by 2-3%.

In addition to commercial banks, leasing companies also entered this business segment, spurring competition to a new high.

SET-listed Krungthai Card Plc, an unsecured loan unit under Krungthai Bank (KTB), is in the process of acquiring a 75.05% stake in Krungthai Leasing Co Ltd from KTB, aiming to expand its financial services to cover secured 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 do a soft launch of a digital auto loan service in the third quarter as it expands from its core business of auto insurance.

Kittiya Srisanit, head of Krungsri Auto Group, said robust competition in the auto loan market this year is in line with new market players and expectations of improved domestic economic activities.

However, each loan service provider has its own business strategy, while the entry of newcomers would benefit consumers and the overall industry, she said.

In 2021, Krungsri Auto forecasts new car sales to gradually improve to 810,000 units.

Under this scenario, the company expects to achieve its auto loan growth target of 5% and control the non-performing loan (NPL) ratio for auto loans at no more than 2%.

Digitalisation is another key strategy to facilitate business growth. Krungsri Auto plans to continue building up the auto loan ecosystem through a partnership strategy, both within and outside the automotive industry.

"We booked new auto loan growth via our digital platform worth 3.8 billion baht last year, rising 10% year-on-year. With a more comprehensive platform ecosystem and digital partners, we expect to see significant growth of our digital auto loans this year," said Mrs Kittiya.

Krungsri Auto aims to expand outstanding auto loans to 448 billion baht this year from 428 billion registered in 2020.

Sakchai Peechapat, president of Tisco Bank, said innovative products and service quality will be key for auto loan growth, 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 car producers is the bank's key strategy to facilitate auto loan growth this year, said Mr Sakchai. Innovative product development that responds to customers' requirements amid the pandemic is another business strategy for auto loan growth, he said.

Despite setting a marginal growth rate for its auto loan portfolio of 2-3% this year, Tisco Bank expects new auto loan bookings of 10-15%.

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