New Delhi, Aug. 07, 2024 (GLOBE NEWSWIRE) -- The Automotive Financing Market in Southeast Asia is expected to grow from US$ 9.92 billion in 2023 to US$ 17.32 billion by 2032, at a CAGR of 6.39% during the forecast period 2024-2032.
The demand for automotive financing in Southeast Asia has surged significantly, driven by several key factors. One of the primary drivers is the region's burgeoning middle class, which has led to increased consumer spending power and a higher demand for personal vehicles. For instance, the middle-class population in Southeast Asia is projected to reach 350 million by 2024. Countries like Indonesia and Vietnam are experiencing substantial improvements in their transportation infrastructure, encouraging more people to switch from motorcycles to cars. Car ownership in Indonesia is expected to increase from 99 vehicles per 1,000 people in 2020 to 150 vehicles per 1,000 people by 2030. Additionally, financing of new vehicles, including both 2-wheelers and 4-wheelers, is projected to contribute more than $9.20 billion to the market's revenue by 2030.
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Another significant factor contributing to the high demand for automotive financing market in the SEA is the rise of e-commerce and the need for efficient logistics solutions. E-commerce sales in Southeast Asia are forecasted to grow from $94 billion in 2024 to $330 billion by 2025. As e-commerce activity skyrockets, there is an increased need for commercial vehicles to support the intraregional and domestic flow of goods. For instance, the demand for light commercial vehicles is expected to grow at a CAGR of 8.5% from 2023 to 2028. Furthermore, the low car ownership ratio in many Southeast Asian countries presents a vast market potential for automotive financing as more consumers aspire to own vehicles. For example, car ownership in Vietnam is projected to increase from 23 vehicles per 1,000 people in 2020 to 45 vehicles per 1,000 people by 2030.
The growing popularity of electric vehicles (EVs) in the region is driving the demand for automotive financing. Governments across Southeast Asia are implementing policies to promote the adoption of EVs, with EV sales in the region expected to increase from 1.2 million units in 2023 to 8.5 million units by 2035. Partnerships between EV manufacturers and financial institutions are making it easier for consumers to access affordable financing options for EVs. For example, Thailand aims to have 30% of total vehicle production as EVs by 2030, while Indonesia plans to have 2.1 million EVs on its roads by 2030. These trends, coupled with competitive financing options and supportive government policies, are expected to sustain the growth of the automotive financing market in Southeast Asia for the foreseeable future.
Key Findings in Southeast Asia Automotive Financing Market
| Market Forecast (2032) | US$ 17.32 billion |
| CAGR | 6.39% |
| Top Trends |
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| Top Drivers |
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| Top Challenges |
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Four-Wheelers Takes the Lead in Booming Southeast Asia Automotive Financing Market
Automotive financing in Southeast Asia predominantly targets four-wheeler vehicles due to several market dynamics and financier perspectives. The region's economic growth has led to increased disposable incomes, making car ownership more attainable. For instance, the passenger car market in India alone was valued at US$ 32.70 billion in 2021 and is expected to reach US$ 54.84 billion by 2027, registering a CAGR of over 9%. This growth is mirrored across Southeast Asia, where the demand for personal vehicles is rising, driven by urbanization and improved infrastructure. This indicates a significant shift towards sustainable automotive solutions, further boosting four-wheeler financing.
As per Astute Analytica, four-wheelers present a lower risk and higher return on investment compared to two-wheelers. The financial efficiency of the automotive sector in Asia shows a return value of 14% on borrowed capital, which is a significant factor for lenders. Moreover, the structured nature of car loans, often backed by collateral, makes them a safer bet for financial institutions. The rise of online automotive marketplaces like Carro, which offers in-house car financing, has also streamlined the loan approval process, making it more attractive for both lenders and borrowers. This digital transformation in car financing is crucial in a region where digital adoption is rapidly increasing. The automotive financing market analysis also highlights the strategic initiatives by governments to promote automotive growth. For example, India's Automotive Mission Plan 2026 and production-linked incentive schemes aim to make the country a global leader in the automotive sector. Similarly, subsidies for electric vehicles under schemes like FAME-II in India, which allocates significant funds to reduce the initial cost of electric vehicles, are encouraging the adoption of four-wheelers. These policies not only stimulate market growth but also provide a stable environment for financiers to operate, ensuring a steady demand for automotive loans.
New Wheels, New Deals: The Rise of New Vehicle Financing in Southeast Asia Taking a Leap Ahead
In 2024, new vehicles dominate automotive financing in Southeast Asia due to a combination of economic growth, government policies, and evolving consumer preferences. The region's GDP growth rates, averaging 5.2% annually, have bolstered purchasing power, with disposable incomes increasing by 7.1% over the past two years. Consequently, automotive loans have surged, with financing for new vehicles comprising 63% of total automotive loans, up from 58% in 2022 in the Southeast Asia automotive financing market. Government incentives, such as tax breaks and subsidies for purchasing new, fuel-efficient cars, have further stimulated demand. For instance, Thailand's excise tax cuts on eco-cars have led to a 12% increase in new car sales, while Indonesia's subsidies for electric vehicles have driven a 15% rise in EV financing.
Technological advancements and a shift towards sustainability also play significant roles. The adoption of electric and hybrid vehicles has accelerated, with sales of new EVs growing by 38% in 2023, compared to a mere 5% growth in the used EV market. Additionally, the availability of advanced safety features and connectivity options in new cars appeals to tech-savvy consumers, who now account for 55% of new car buyers. This demographic shift is reflected in the 25% increase in financing for vehicles equipped with advanced driver-assistance systems (ADAS) and connected car technologies.
Financial institutions across the SEA automotive financing market have adapted to these trends by offering attractive loan packages for new vehicles. Interest rates for new car loans have decreased by an average of 1.5% compared to used car loans, and flexible repayment plans have become more prevalent. Banks in Malaysia report a 20% increase in new vehicle loan applications, while Vietnam's automotive financing sector has seen a 17% growth in new vehicle loans. These favorable financing conditions, coupled with rising consumer confidence and a robust economic backdrop, underscore why new vehicles lead in automotive financing in Southeast Asia.
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Banks at the Helm of Automotive Financing in Southeast Asia
Banks are the leading automotive financing providers in Southeast Asia due to several key factors as banks have a well-established presence in the region, with a wide network of branches and ATMs, making them easily accessible to potential car buyers. This accessibility allows banks in the Southeast Asia nations automotive financing market to reach a large customer base and offer automotive financing solutions to a diverse range of individuals and businesses. Additionally, banks often have longstanding relationships with customers, built on trust and reliability, which makes them a natural choice for those seeking automotive financing. Apart from this, banks have the financial resources and stability to provide competitive interest rates and flexible repayment options. This financial strength gives them an edge over other financing institutions and makes them an attractive option for individuals looking to purchase a vehicle. Furthermore, banks often offer additional services such as insurance and wealth management, creating a one-stop solution for customers' financial needs.
Key banks in Southeast Asia that have solidified their position as leading automotive financing providers include DBS Bank, OCBC Bank, and United Overseas Bank in Singapore, as well as Maybank and CIMB Bank in Malaysia. These banks have demonstrated a strong commitment to the automotive financing sector, with tailored products and services to meet the specific needs of customers in the region.
According to experts at Astute Analytica, 68% of car buyers in Southeast Asia automotive financing market prefer to finance their vehicle through banks due to the competitive interest rates offered. Furthermore, data from the Southeast Asian Automotive Financing Association indicates that banks account for approximately 75% of all automotive financing transactions in the region. These statistics highlight the significant influence and dominance of banks in the automotive financing sector in Southeast Asia.
Thailand is Sitting in Driver Seat and Dominate Southeast Asia Automotive Financing Market
Thailand's dominance in the automotive financing sector across Southeast Asia can be attributed to a combination of strategic economic policies, robust infrastructure, and a thriving automotive industry. As of 2024, Thailand has solidified its position through a series of initiatives and favorable market conditions. The country’s automotive industry, which accounts for approximately 10% of its GDP, has been a significant driver of this dominance. With an annual production of over 2 million vehicles, Thailand has become the largest automotive hub in the region, bolstering the demand for automotive financing.
One of the key factors behind Thailand's leadership is the strong collaboration between government and private sector. The Thai government has implemented various incentives, including tax breaks and subsidies, to attract foreign investment in the automotive sector. As a result, top global automotive manufacturers have established production facilities in Thailand, creating a robust supply chain and comprehensive financial services ecosystem. In 2024, foreign direct investment (FDI) in Thailand’s automotive industry reached $8 billion, underlining the country’s allure for global investors and its impact on the financial sector in the automotive financing market.
The financial infrastructure in Thailand is another critical factor contributing to its dominance. The country's banking sector has been proactive in developing tailored financial products to cater to the automotive market. With over 80% of vehicle purchases in Thailand being financed through loans, the financial sector has adapted to provide competitive interest rates and flexible financing options. The non-performing loan (NPL) ratio in the automotive sector remains low at 1.5%, reflecting the stability and efficiency of financial institutions in managing automotive loans. Additionally, consumer behavior and economic stability play significant roles. The middle class in Thailand continues to expand, with an estimated 70% increase in disposable income over the past decade. This economic growth has translated into higher demand for vehicles and, consequently, automotive financing. The car ownership rate in Thailand stands at 200 vehicles per 1,000 people, the highest in Southeast Asia. Coupled with a low unemployment rate of 1.2% and a GDP growth rate of 4.5% in 2024, these factors create a conducive environment for sustained growth in automotive financing market.
SEA Automotive Financing Market Key Players
- BNP Paribas
- Chase Auto Finance
- Honda Financial Services
- Hitachi Capital
- General Motors
- For Mototr Credit Company
- Daimler Financial Services
- Volkswagen Financial Services
- Toyota Financial Services
- Standard Chartered Auto Financing
- DBS Car Loan
- Other Prominent Players
Key Market Segmentation:
By Vehicle
- 2 Wheeler
- 3 Wheeler
- 4 Wheeler
- LCVs
- HCVs
By Ownership
- New Vehicle
- Used Vehicle
By Providers
- Banks
- OEMs
- Others
By Vehicle Usage
- Commercial
- Private
- Heavy
By Financing
- Leases
- Loans
- Direct
- Indirect
By End User
- Individuals
- Enterprises
By Country
- Malaysia
- Singapore
- Thailand
- Indonesia
- Vietnam
- Philippines
- Cambodia
- Myanmar
- Rest of SEA
View report summary and Table of Contents (TOC): https://www.astuteanalytica.com/industry-report/southeast-asia-automotive-financing-market
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