Krungsri Auto banks on dealerships, online channel

Ayudhya Capital Auto Lease (Krungsri Auto), a subsidiary of Bank of Ayudhya and the major player in vehicle loans, will focus more on building relationships with auto dealerships and strengthening its online channel in an effort to keep growing faster than rivals in this sector. 

Pairote Cheunkrut, first executive vice president of BAY and managing director of Krungsri Auto, said that even though domestic car sales had bottomed out and used-car prices were stable, the instalment-loan market in 2015 was not expected to witness healthy growth.

“We have found that consumers want to buy vehicles but they are not yet hurrying to make a decision. However, based on the assumption of 1 million car sales next year, the hire-purchase industry will grow by 6-7 per cent, compared with [this year’s] expected loan drop of 25 per cent,” he said. That means the banking industry’s total outstanding hire-purchase loans will end this year at Bt530 billion.

The new excise-tax structure for vehicles that will be effective in 2016 will have a positive impact on car sales in 2015, as consumers speed up their decisions to buy vehicles before the changes. 

Vehicles with engines smaller than 1,500ccm, such as eco-cars, are expected to be more in demand because consumers can afford them.

High household debt remains a big barrier against new lending, but the government’s policies on enhancing economy should reduce this problem in the new year, Pairote said.

Krungsri Auto’s policy is to grow faster than the market. This year, its overall lending grew by 1 per cent, attributed to use of its online channel for used-car lending, and becoming more active in the big-bike segment, a rising star this year.

“We expect to end the [year with] outstanding loans of Bt228 billion, of which new cars are the major portfolio at 50 per cent, followed by used cars and refinancing at 45 per cent and the rest in motorcycles and big bikes,” he said.

Krungsri Auto is the market leader in instalment loans for motorcycles with a total portfolio of Bt10 billion. He said the motorcycle market still had room to grow because many people were not accessing the financial system. Further, the big-bike segment was showing dramatic growth.

“Big-bike importers are more active in bringing in new models to supply the huge demand,” he said.

Pairote said Krungsri would announce its financial targets next month. The company will use two main strategies to outstrip the rest of the market, focusing on refinancing and motorcycle loans.

The first strategy is to continue using the online channel, www.krungsrimarket.com, to tap consumers in the used-car segment as this market becomes attractive again.

Krungsri Auto developed the website to help used-car dealers and individuals make transactions easily than dealing with bank branches, he said.

The company is also developing the online channel for its Car for Cash refinancing product. Refinancing will be a key driver of Krungsri Auto next year as well.

The second strategy is business partnerships for new-car loans. The company recently broadened its relationship to Honda by jointly conducting marketing campaigns. 

In general, Honda will use its captive leasing to service its clients.

Pairote said Krungsri Auto would form a similar partnership with Toyota soon.

Krungsri Group’s major shareholder Bank of Tokyo-Mitsubishi UFJ has a strong network in the corporate sector, and BTMU’s value chain with auto dealerships will be a key driver of new car loans for Krungsri Auto in the near future.