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A Strategic Appraisal of Opportunities in Eastern European Automotive Finance Markets
Frost & Sullivan, Jan 2005
Stricter EU Regulations with regard to Value-added Taxes on Car Purchases and Insurance Products Pose Strong Challenge
Recently introduced regulations on value-added tax (VAT) pose challenges to the growth of car sales and financing in the European Union (EU) and are causing a sharp decline in borrowing trends due to decreasing customer confidence. The primary challenge facing finance companies is to structure and provide alternative finance products, including insurance, to ease tax concerns. For instance, innovative promotions such as free gap insurance products and low and deferred monthly payment options are expected to alleviate customer concerns and boost confidence in borrowing. Dealers and educational advertising communicating the benefits of these products are expected to play important roles in steering the purchase decisions of customers.
This Frost & Sullivan research service analyses the eastern European automotive point-of-sale (POS) finance market in the following countries: Poland, Hungary, the Czech Republic, the Slovak Republic, Slovenia, Romania, Latvia, Lithuania and Estonia. The study provides valuable insights for companies looking to enter this market. It also encapsulates detailed strategic recommendations on market entry, products, product positioning, promotions and a comprehensive analysis of growth strategies adopted by leading market participants.
Joint Ventures, Partnerships and Wholly-owned Subsidiaries Set To Increase in Market
Competition in the eastern European automotive POS finance market is expected to intensify following extensive marketing efforts by finance companies including creative promotions, flexible financing and value-added products. While opportunities in this market are plentiful for new entrants, both foreign captives and independent finance companies need to understand the local market dynamics before increasing investments or starting subsidiary operations.
'Joint ventures (JV) and partnerships are anticipated to be suitable entry modes for foreign captives and independents in the short run, while in the long run, foreign entrants can either acquire or set up wholly-owned subsidiaries in eastern Europe,' says the analyst of this research service. This will help them in expanding presence while ushering in new products and services to the market and realising critical economies of scale.
Buoyant Growth Projected for Eastern European Automotive Finance Market
'Despite the slump in vehicle sales and changes in the legislative and economic landscape in 2004, Frost & Sullivan anticipates buoyant growth in the eastern European POS finance market through the decade,' says the analyst. 'Total POS loans are expected to reach 1.6 million cases and total finance volume is anticipated to exceed 10.3 billion euros by 2011.'
While independent finance companies currently dominate the market for both new and used cars, new captive entrants are gearing up to invest heavily in car promotions and are combining value-added services with finance products. This is likely to result in increased penetration and market share for captive companies. However, independent companies are expected to continue as aggressive competitors to captives mainly due to consolidations and good dealer relations in Eastern Europe.
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