Geely-BNP Financing Venture Part Of Growing Trend
BMI View : Geely and BNP Paribas's new auto financing JV is part of a growing trend among automakers to provide attractive financing packages through their subsidiaries to maintain sales and defend their market share. We believe the percentage of vehicle sales, which utilise some form of credit, is poised to grow in the coming years as consumers become more willing to embrace loans to purchase durable goods such as cars.
Zhejiang Geely Holding Group Co and French bank BNP Paribas have formed a joint venture (JV) to provide consumer auto financing in China. The JV will have a registered capital of CNY900mn (US$148mn), which will be used to provide floorplan financing to Geely's dealers as well as loans to car buyers. Geely will hold a 80% stake in the JV and BNP will hold the remaining 20%.
Geely will join other automakers such as General Motors Company, Hyundai Motor and Volkswagen, which already provide auto financing services in China. Besides boosting car sales, these captive financing services of these global automakers provide additional revenue for the firms once they sell a vehicle to the customer. Going forward, we expect more automakers to start providing consumer loans and become an alternative financing entity to commercial banks.