Tag Archives: subprime lending

China’s Cheap Car Strategy for US

china flagHans Greimel writes an interesting perspective published by AutoNews on China’s Cheap Car Strategy for the United States.  Check it out:

SHANGHAI — How much will a Chinese brand need to discount its cars to succeed in America?

Wu Song, general manager of aspiring U.S. entrant Guangzhou Automobile Group Motor Co., says he has that magic number: His cars will have to be priced 30 percent cheaper than rivals in the same segment.

If everything goes his way, Wu will be testing his bargain-basement pricing strategy with the U.S. launch of his company’s GS4 crossover sometime in 2017.

“We are confident. It could be popular in the market,” Wu told Automotive News at the Shanghai auto show. “Considering the low price, it should be competitive.”

The company’s top executive already is seeking U.S. dealers, importers and distributors.

Guangzhou Automobile, which goes by the abbreviation GAC, is the latest Chinese automaker floating plans to sell made-in-China cars in the U.S., following similar pronouncements by Great Wall Motor Co. and BYD Auto Co.

Skeptics often pooh-pooh such goals, noting the many Chinese brands that have pledged to be on sale in the U.S. in two or three years but still aren’t. But Wu’s comments shine a light on the pricing calculus they are working with.

With no true bargain brands left in the U.S. market, Chinese brands see room to make a pure price play.  Read More.

Subprime Borrowing is Hot in the Car Business

CAR KEYS - SUBPRIME LENDINGToday, people are able to buy new cars even with a credit score lower than 500. A year ago that would have been very difficult to pull off. Dealerships all over the country are offering deals for high credit risk buyers as long as they have a good job, current utility bills that are in good standing, and some money for a down payment.
The market for subprime borrowing is hot and this time the car business is leading the way. The central bank’s stimulus is making it easier for people with spotty credit to buy cars as investors purchase riskier bonds linked to auto loans. Below are some interesting facts surrounding subprime lending:

  • Subprime car buyers account for more than 27% of loans for new vehicles, compared to 25% last year and 18% in 2009.
  • Issuance of bonds linked to subprime auto loans soared to $17.2 billion this year, more than double the amount sold during the same period in 2010.
  • Some experts believe that vehicle loans are safer because the underlying asset can be more accurately valued, it’s easier to repossess, and people who need a car to get to work make that payment a priority.
  • 58% of loans taken out to purchase Chrysler’s Dodge brand vehicles in October were with loans above the industry average of 4.2% annual percentage rate, according to Edmunds, a researcher that tracks vehicle sales.
  • Buyers with imperfect credit account for 27% of loans for new vehicles.

*Synopsis of an article published by The Toledo Blade at http://www.toledoblade.com/Automotive/2013/11/12/Subprime-borrowing-gains-traction-in-the-auto-industry.html