Krungsri Auto targets big bike market
Krungsri Auto, the auto-financing arm of Bank of Ayudhya, will initiate lending in the used big-bike segment this quarter to tap rising demand and boost its yield for motorcycle loans.
Pairote Cheunkrut, head of Krungsri Auto, said yesterday that dealers had asked the company to offer financing to customers interested in buying a used big bike, while the increased supply of this type of motorcycle presented an opportunity to drive lending and expand its yield.
Krungsri Auto – the market leader in motorcycle leasing, with outstanding loans of Bt12.74 billion – has been in the business of lending to buyers of new big bikes since 2009, riding the domestic boom in this mode of transport.
Lending for big bikes poses a lower risk than for normal motorcycles, he said, adding that big-bike leasing accounts for 40 per cent of the company’s motorcycle-loan portfolio.
The overall market for big-bike sales this year is expected to reach 40,000 units, from 30,000 last year, and Krungsri Auto predicts that around 24,000 used bikes will be put on the market next year as buyers generally change models after owning such a vehicle for three to four years.
The price of a used big bike can be 40 per cent lower than a new one, which is attractive for people interested in buying such a vehicle but with insufficient funds to commit to a new one, he added.
Krungsri Auto, which defines a new big bike as one costing more than Bt100,000, requires customers to make a down payment of 30-40 per cent in order to receive financing.
For used big bikes, the company will require a down payment of just 20 per cent. "Normal bikes generate a higher yield than big bikes, but big bikes pose a low risk and the loan amount is larger, so we consider that if we can tap the market for used big bikes, our yield for motorcycle lending will improve," Pairote explained.
Interest rates for used big-bike loans start at 6 per cent per annum, against 4 per cent per year for new big bikes and 1.5 per cent for normal bikes.
Nationwide sales of mainstream motorcycles have fallen this year, although by a lower rate than passenger-car sales. In the first nine months, sales of normal bikes came in at 1.29 million units, down 2 per cent year on year.
The market expects full-year sales of normal bikes to decline by about 2 per cent, to 1.66 million units.
Krungsri Auto’s motorcycle-finance business has outpaced the market so far this year, with outstanding lending of Bt12.74 billion at the end of the third quarter – an increase of 19 per cent from the end of last year.
It targets new motorcycle loans of Bt9.85 billion this year, an increase of 20 per cent from Bt8.2 billion last year, said Pairote.
Based on this target, outstanding motorbike loans at the year’s end will come in at Bt13.2 billion, representing growth of 23 per cent from Bt10.73 billion.
Sales of normal bikes next year are expected to return to positive growth of at least 2 per cent, because the money injected into the grass-roots economy via the government’s Village Fund scheme is positive for the motorcycle market, he added.
