The Chinese market has bypassed a lot of conventional technologies in favor of newer and more efficient alternatives. Most prominent of this practice is the popularity of mobile payment platforms in the country compared to the traditional payment methods like credit cards. As such, many market observers are predicting that the Chinese market will more or lease bypass traditional car leasing arrangements in favor of a newer subscription-based model.
Deloitte partner Sebastian Pfeifle discussed this shift in the market model during the last Auto Finance Summit Asia. Mr. Pfeifle added that China has the technological capabilities in order to implement this market model. Moreover, the country also has huge smartphone penetration, something that will play a critical role in the adoption of this new car subscription-based model.
On the other hand, Dongfeng Nissan Auto Finance President George Leondis said that financing is starting to get a stable foothold in China. Recent data revealed that three years ago, dealers earned 15 percent of their profits mainly from financing. In recent years, that figure has essentially doubled to as much as 30 percent.
Mr. Leondis added that OEM can essentially benefit from financing. He argued that interest rate incentives are far better when it comes to the long-term value of a particular car, as opposed to paying for the car upfront.
Aside from China, several major markets are also seriously considering the implementation of the car subscription model as opposed to the traditional methods of owning a car.
Major car manufacturers are also jumping into the scene in order to take advantage of the still fledgling niche. German car manufacturer BMW has launched a pilot program call Access by BMW. By using this service, users can essentially own a BMW car through monthly subscription rather than paying for it upfront.
American luxury car maker Cadillac debuted its own OEM program in January 2017. The program called Book by Cadillac was only limited in New York during its initial launch. However, Cadillac was able to extend the coverage of the service and now caters to drivers in Los Angeles and Dallas.
Aside from car subscription, another interesting segment of the transportation industry is slowly gaining massive interest in China. One in particular booming business is ride-sharing transportation network. China is one of the biggest markets when it comes to ride-sharing. In fact, China's ride-sharing giant Didi Chuxing was so huge that it was able to bully rival Uber out of the market.
