SCB ups focus on loans for buyers of high-powered vehicles

Even though domestic auto sales in the first six months fell by 15-16 per cent from the same period last year, SCB expects demand will recover in the final quarter, driven by large-engine vehicles.

This is because the price of such vehicles will increase when the new-vehicle excise regime – tied to carbon emissions – becomes effective on January 1, Narong Srichukrin, head of auto finance and personal loan products, said last week.

High carbon-emission vehicles will attract higher excise duty than their lower-emission counterparts from that date.

The expected increase in demand for large-engine vehicles will spur lending in the second half of this year, and SCB is optimistic its new auto loans can surpass the full-year target of Bt80 billion as a result, he said.

Last year, SCB generated new auto lending of just Bt56 billion, as it did not want to compete with captive leasing companies, which offered loans to help their auto dealers release inventories, he explained.

This year, however, captive leasing companies – those tied to auto-makers – have slowed their lending, giving SCB the opportunity to acquire new business in the sector.

During the first six months, SCB provided new auto loans of around Bt40 billion, enabling its outstanding lending in the auto sector to climb to Bt170 billion from Bt168.67 billion at the end of last year.

By the end of this year, outstanding lending is expected to rise to Bt180 billion, based on the new-loan target of Bt80 billion, he added.

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Narong said the bank would like to finance customers buying premium European vehicles, but to date had been unable to make inroads into this segment because the captive leasing operators offered campaigns such as free first-class insurance, which was something it may not be able to afford.

"However, the bank will try to offer special pricing if we consider we can beat some of those leasing firms’ campaigns, because the lending amount for one European car is equal to four Japanese cars," he said.

Meanwhile, SCB is maintaining its strategy in regard to tapping the financing market for pickups, as the level of non-performing loans (NPLs) from the segment is lower than that for passenger cars, Narong said, adding that 35-40 per cent of its new auto loans were for pickup purchases.

The bank’s branches around the country remain the chief channel for attracting auto-loan customers because the staff in each area know the locals well.

My Car My Cash

They are, therefore, also the main channel in promoting SCB’s auto-refinance product, My Car My Cash.

My Car My Cash gives a yield of 10 per cent, similar to that for used cars, but the My Car My Cash operation has lower NPLs, he said.

With the economic slowdown benefiting the auto-refinance market because many car owners require more cash, the monthly volume of new My Car My Cash refinancing customers has increased to 5,000 from 2,800-3,000 last year.

The loan portfolio of My Car My Cash is expected to reach Bt30 billion this year, from Bt28 billion in 2014, yet the proportion of My Car My Cash business in the bank’s overall auto lending will not increase much, because this category of borrower repays the debt quickly, he explained.

At present, the loan contribution of My Car My Cash is 15 per cent, while new cars account for 61 per cent, and used cars for the remainder.