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Consumer Automotive Financial Services in the Philippines

  • September 2014
  • -
  • Finaccord
  • -
  • 50 pages

Consumer Automotive Financial Services in the Philippines investigates the market for automotive financial services linked to sales of new and used passenger cars to individual buyers in the Philippines. In addition to analysing the market for finance and leasing services, the study also covers motor insurance, road assistance, extended warranties, GAP insurance and prepaid service contracts plus creditor insurance.

Using survey results for average take-up rates for finance and leasing propositions at the point of sale, data for the size and growth of the automotive finance and leasing market for consumers in the Philippines is provided in terms of gross advances and assets leased for 2009 to 2013 with splits between finance for new and used cars and between finance organised through dealerships at the point of sale and directly with banks or other lending institutions.

Moreover, also by means of data for average take-up rates, the markets for motor insurance and road assistance are sized in terms of gross written premiums and other revenues sold through the automotive trade (i.e. via dealers and manufacturers) in 2013. These markets, estimated to be worth PHP 2.95 billion in total in 2013, are broken down between new and used cars, and between new contracts sold during 2013 and in-force business sold in previous years but still being renewed in 2013.

The report draws on a survey of 50 leading car dealerships as well as an analysis of the approach to consumer automotive financial services of 33 car manufacturer brands in the Philippines. The PartnerBASE™ dataset that accompanies the report details each of the marketing initiatives for consumer automotive financial services traced by Finaccord for both dealers and manufacturers; a market data annexe is also available in a convenient spreadsheet format so that there is no need to re-enter key data points from the report.

In addition to captive finance companies owned by manufacturer brands, organisations covered by the report include Assistance Alliance International, Bank of the Philippine Islands, BDO Unibank, Commonwealth Insurance, Ibero Asistencia, MAPFRE Insular Insurance, Metrobank / PSBank, People's General Insurance, Standard Insurance and UnionBank of the Philippines. Together, the report and database will provide you with the definitive guide to current and future opportunities in consumer automotive financial services in the Philippines.

Table Of Contents

Consumer Automotive Financial Services in the Philippines
TABLE OF CONTENTS
0.0 EXECUTIVE SUMMARY ... 1
1.0 INTRODUCTION 3
What is this report about? .. 3
The focus of the report is on financial services related to the sale of passenger cars to individuals .. 3
Rationale . 3
The provision of financial services is essential to support both car sales and profitability .. 3
This report offers a new and detailed analysis of the subject in the Philippines based on primary research 3
Methodology ... 3
Survey of dealers and manufacturers 3
Market data . 4
Computation of market data is based on a complex set of assumptions and variables… . 4
…in order to provide market segmentations in unrivalled detail .. 5
External sources . 6
Definitions ... 6
Finance and leasing products 6
Insurance, warranty and assistance products ... 7
Operating models ... 7
Tied and non-tied providers 8
Abbreviations .. 8
Exchange rate . 8
PartnerBASE and market data annexe 8
Finaccord 9
2.0 MARKET ANALYSIS ... 11
Introduction ... 11
Passenger vehicle data ... 12
Sales of new cars in the Philippines exceeded 60,000 for the first time in 2013... 12
...and used car sales have been growing even faster ... 12
Toyota and Mitsubishi hold over half of the new passenger vehicle market between them . 13
Consumer automotive finance and leasing market 15
Market size and growth 15
New cars financed at the point of sale form the largest segment in this market by volume... .. 15
... and amount to well over half of the market by value .. 16
Types of finance and leasing product .. 18
The point-of-sale finance market of the Philippines is dominated by simple loans ... 18
Consumer automotive insurance, warranty and assistance markets ... 19
Market sizes .. 19
In total, the automotive trade is likely to have sold contracts worth nearly PHP 3 billion in 2013 . 19
Survey of automotive dealers and manufacturer brands - overview . 22
Introduction 22
Provision of consumer automotive financial services . 22
All dealers surveyed distribute three core automotive financial services... 22
...and there is an apparent opportunity for motor insurers to work with several manufacturer brands . 22
Number and nature of dealer schemes ... 24
Dealers typically work with multiple non-tied partners both for finance and leasing and for motor insurance . 24
Types of motor insurance policy sold by dealers 26
Dealers sell both liability-only and comprehensive motor insurance . 26
Sources of road assistance distributed by dealers . 27
Road assistance comes automatically with comprehensive motor insurance in the Philippines . 27
Consumer uptake of automotive financial services through dealers . 28
More than 70% of new car buyers take out the three core products... .. 28
...and more than 60% of used car buyers take out motor insurance via dealers .. 28
Survey of automotive dealers and manufacturer brands - partnerships ... 30
Introduction 30
Finance and leasing .. 31
At least 20 providers of finance and leasing work directly with dealers... .. 31
… led by BDO Unibank, PSBank and EastWest Bank .. 31
Specialist car finance companies are most visible in the used car sector . 31
These include Radiowealth Finance Company and Laus Auto Finance .. 31
Toyota Financial Services operates as a joint venture with Metrobank. 33
By weighted share of partnerships, Bank of the Philippine Islands is a clear non-captive leader… 33
… although BDO Unibank has the largest number of relationships with manufacturer brands ... 33
Bank of the Philippine Islands has the highest implied share of new business on a combined analysis… . 35
… with the top six competitors likely to account for more than 80% of the total market ... 35
Motor insurance 36
The vast majority of dealers use non-tied partners only for motor insurance... . 36
... and these are led by Standard Insurance in a highly fragmented market . 36
In contrast, Federal Phoenix Assurance dominates manufacturer brands' partnerships... .. 38
...ahead of 12 other competitors.. 38
The predominance of non-tied partnerships implies that Standard Insurance is the overall market leader 40
Extended warranties . 41
Some major chains of dealers have their own extended warranty programs... 41
...largely because few manufacturer brands have organised this product 41
Road assistance ... 44
Road assistance is available from all dealers investigated, usually as cover embedded in motor insurance . 44
Assistance Alliance International claims the most important manufacturer brand partnership… 45
… although Ibero Asistencia holds a greater number of them ... 45
GAP insurance .. 47
A market for GAP insurance has yet to develop to any significant degree in the Philippines... 47
Prepaid service contracts . 48
Autohub Group operates a program for prepaid service contracts... . 48
...which are also available from two manufacturer brands . 48

LIST OF GRAPHICS / TABLES

0.0 EXECUTIVE SUMMARY ... 1
Key market data for consumer automotive financial services in the Philippines, 2013 .. 2
1.0 INTRODUCTION 3
2.0 MARKET ANALYSIS ... 11
Passenger car parc and new / used passenger car sales in the Philippines, 2009 to 2013 12
Passenger car parc and new / used passenger car sales in the Philippines, 2009 to 2013 (table) 13
New light passenger vehicle registrations in the Philippines, segmented by manufacturer group, 2013 ... 14
New and used passenger car finance market in the Philippines, segmented by distribution channel: volumes, 2009 to 2013. 15
New and used passenger car finance market in the Philippines, segmented by distribution channel: values, 2009 to 2013 16
New and used passenger car finance market in the Philippines, segmented by distribution channel: values and volumes, 2009 to 2013 (table) .. 17
% split between the different types of finance and leasing contract organised at the point of sale in the Philippines, 2014 .. 18
Total revenues from consumer automotive insurance, warranty, assistance and service contract markets in the Philippines, 2013 20
Total revenues from consumer automotive insurance, warranty, assistance and service contracts in the Philippines, 2013 (table) .. 21
Comparison of the provision of each type of automotive financial service by dealers and manufacturer brands in the Philippines, 2014 ... 23
Average number of tied and non-tied schemes organised by dealers for each type of automotive financial service in the Philippines, 2014 (table) ... 24
Average number of tied and non-tied schemes organised by dealers for each type of automotive financial service in the Philippines, 2014 ... 25
% split between the different types of motor insurance policy sold at the point of sale in the Philippines, 2014 .. 26
% availability of road assistance through factory warranties, annual services, extended warranties, motor insurance, prepaid service contracts and as a stand-alone product in the Philippines, 2014 . 27
% of new and used car purchasers acquiring each type of automotive financial service at the point of sale in the Philippines, 2014 29
Provision of finance and leasing by dealers in the Philippines, 2014: provision rate, product sources and provider share of non-tied partnerships .. 32
Provision of finance and leasing by manufacturer brands in the Philippines, 2014: provision rate, operating models and weighted provider share of partnerships 34
Implied market shares of new business for finance and leasing in the Philippines, 2014 ... 35
Provision of motor insurance by dealers in the Philippines, 2014: provision rate, product sources and provider share of non-tied partnerships .. 37
Provision of motor insurance by manufacturer brands in the Philippines, 2014: provision rate, operating models and weighted provider share of partnerships 39
Implied market shares of new business for motor insurance in the Philippines, 2014 . 40
Provision of extended warranties by dealers in the Philippines, 2014: provision rate, product sources and provider share of non-tied partnerships .. 42
Provision of extended warranties by manufacturer brands in the Philippines, 2014: provision rate, operating models and weighted provider share of partnerships 43
Provision of road assistance by dealers in the Philippines, 2014: provision rate and product sources .. 44
Provision of road assistance by manufacturer brands in the Philippines, 2014: provision rate, operating models and weighted provider share of partnerships 46
Provision of GAP insurance by dealers in the Philippines, 2014: provision rate and product sources ... 47 CONSUMER AUTOMOTIVE FINANCIAL SERVICES IN THE PHILIPPINES
Provision of GAP insurance by manufacturer brands in the Philippines, 2014: provision rate and operating models .. 48
Provision of prepaid service contracts by dealers in the Philippines, 2014: provision rate, product sources and provider share of non-tied partnerships ... 49
Provision of prepaid service contracts by manufacturer brands in the Philippines, 2014: provision rate, operating models and weighted provider share of partnerships 50

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