Develop car loan at Toyota dealers in Vietnam a case study of TFSVN

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY    NGUYEÃN HOAØNG DUY DEVELOP CAR LOAN AT TOYOTA DEALERS IN VIETNAM A CASE STUDY OF TFSVN MASTER’S THESIS HO CHI MINH CITY – 2010 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY NGUYEN HOAỉNG DUY DEVELOP CAR LOAN AT TOYOTA DEALERS IN VIETNAM A CASE STUDY OF TFSVN MAJOR : BANKING MAJOR CODE : 60.31.12 MASTERS THESIS THESIS INSTRUCTOR: DR. A. PR. PHAẽM VAấN NAấNG HO CHI MINH CITY 2010 i ACKNOWLEDGEMENTS This paper could not have been completed without the help, encouragement and support from a number of people who all deserve my sincerest gratitude and appreciation. First of all, I would like to express my special thanks to Dr. A. Pr. Phaùm Vaờn Naờng, my thesis instructor. Im indebted to his inspiration, scholarly supervision and intellectual support throughout the course of writing this graduation paper. His continual encouragement, careful reading, critical comments and patient guidance made my work more enjoyable and easier. I would like to thank all my beloved teachers at University of Economics Ho Chi Minh City (UEH), the Post-graduate Faculty for their support and valuable knowledge and experiences during my study at UEH. Special words of thank also go to all my colleagues at Toyota Financial Services Vietnam, Toyota Motor Vietnam, Toyota Authorised Dealers and other interviewees for their willing participation and ideas in the study. I greatly appreciate their generosity with their time and efforts in helping me. Without them this paper could not have been possible. Finally, my deepest gratitude and appreciation go to my family, my friends and my classmates. Their love, support and constant encouragement gave me a great deal of strength and determination that help me during the time of writing this paper. Nguyeón Hoaứng Duy ii DECLARATION OF THESIS Author’s full name : Nguyeãn Hoaøng Duy Date of birth : 11 th January 1982 Thesis title : Develop Car Loan at Toyota Dealers – A Case Study of TFSVN Thesis instructor : Dr. A. Pr. Phm Vn Nng Major code : 60.31.12 In order to complete this dissertation, the author spent time on studying, collecting relevant information, exchanging ideas with experts, working for and accumulating practical facts from the company’s operation and business. I hereby declare that the submitted work has been done by me, data and findings given in this thesis is true and correct. I agree to any crosscheck about the mentioned information and the dissertation. Nguyeãn Hoaøng Duy iii TABLE OF CONTENT INTRODUCTION CHAPTER 1: OVERVIEW OF CAR LOAN 1 1.1 Consumer loan 1 1.1.1 Consumer loan 1 1.1.2 Personal loan 1 1.2 Car loan 1 1.2.1 Car loan 1 1.2.2 Car loan of Banks 2 1.2.3 Common car loan attributes 2 1.3 CAMPARI Model – The Risk management model of Car loan 5 1.4 Credit risk 7 1.5 Overdue debt 8 CHAPTER 2: CAR LOAN AT TOYOTA DEALERS & TFSVN 10 2.1 Overview of Vietnam’s economy in recent years 10 2.1.1 The economic growth 10 2.1.2 GDP per capita 11 2.1.3 Stabilizing the Macro-economy 11 2.2 Overview of Credit institutions in Vietnam 14 2.2.1 Overview of the forms of credit institutions 14 2.2.2 Reform of Vietnam’s banking system 15 2.2.2.1 Overview 15 2.2.2.2 Prospects 16 2.2.2.3 Needs for and potentials of consumer finance 17 2.3 Vietnam automotive industry 18 2.3.1 Development of automotive industry 18 2.3.2 Vietnam’s master plan of the automotive industry 19 iv 2.3.3 Finance and supporting policies 21 2.3.4 The automobile markets in East Asian countries and Vietnam 21 2.4 Toyota Motor Vietnam 23 2.4.1 Introduction 23 2.4.2 Toyota dealer network 24 2.5 Automotive market & Toyota sales in Vietnam 26 2.5.1 Car model purchase in 2009 26 2.5.2 Toyota sales in the world 28 2.5.3 Toyota sales in Vietnam 30 2.5.3.1 Toyota market share in Vietnam 30 2.5.3.2 Toyota sales from Jan to Jun 2010 33 2.5.4 Toyota customer profile 34 2.6 Toyota Financial Services Vietnam (TFSVN) 35 2.6.1 Information on TFSVN 35 2.6.1.1 Incorporation of TFSVN 35 2.6.1.2 Organizational structure 36 2.6.1.3 Legal status 36 2.6.1.4 Legal framework 37 2.6.1.5 Objectives and Scope of business 38 2.6.1.6 TFSVN’s car loan products 39 2.6.1.7 TFSVN’s SWOTs 41 2.6.1.8 Car loan comparison among Banks and TFSVN 41 2.6.2 Car loan at Toyota dealers 44 2.6.2.1 Growing proportion of car loan in Toyota sales 44 2.6.2.2 Car loan sales 46 2.6.2.3 Car loan to individual 48 2.6.2.4 Individual car loan by Bank types and TFSVN 49 2.6.3 TFSVN’s prudential ratios 53 2.6.3.1 Capital Adequacy Ratio 53 v 2.6.3.2 Credit limit to customers 53 2.6.3.3 Payment ability 54 2.6.3.4 Short-term capital for medium to long term lending 55 2.6.4 Loan classification and Provision 55 CHAPTER 3: RECOMMENDATIONS FOR TFSVN 57 3.1 TFSVN’s Credit risk management 57 3.1.1 TFSVN’s Credit risk management principles 57 3.1.2 TFSVN’s Credit risk management process 57 3.1.3 Credit assessment 58 3.2 The orientation of development 63 3.2.1 Niche strategy 63 3.2.1.1 Sales performance 63 3.2.1.2 Customer retention 64 3.2.1.3 Dealer support 64 3.2.2 New products launch 65 3.2.2.1 Car loan to fleet customers 65 3.2.2.2 Car loan for used cars 66 3.2.2.3 Agency for insurance 67 3.2.3 Implement low cost business model 68 3.2.4 Efforts for sustainable growth 68 3.2.5 Short term and Mid-long term plan 70 CONCLUSION 72 LIST OF REFERENCES 73 LIST OF INTERVIEWEES 75 LIST OF APPENDICES 76 APPENDIX 1 77 TOYOTA FINANCE GROUP’S EXPERIENCES IN CONSUMER FINANCE vi APPENDIX 2 82 TOYOTA MOTOR VIETNAM APPENDIX 3 89 ECONOMIC ITEMS vii ABBREVIATIONS BTC : Banking Training and Consultancy CBU : Complete Built Unit CKD : Complete Knock Down CIC : Credit Information Center CRM : Credit Risk Management CPI : Consumer Price Index FDI : Foreign Direct Investment FED : Federal Reserve System FDIC : Federal Deposit Insurance Corporation GDP : Gross Domestic Product MOF : Ministry of Finance MNCs : Multi-National Corporations MPV : Multi-Purposed Vehicle PC : Passenger Car SOEs : State-Owned Enterprises SOCBs : State-Owned Commercial Banks SBV : State Bank of Vietnam SFCs : Subsidiary Finance Companies SUV : Sport Utility Vehicle TASS : Toyota Authorised Service Station TFSVN : Toyota Financial Services Vietnam TFSC : Toyota Financial Services Corporation TFC : Toyota Finance Corporation TMC : Toyota Motor Corporation TMV : Toyota Motor Vietnam VAMA : Vietnam Automobile Manufacturers’ Association viii LIST OF TABLES Table 2.1: The structure of Vietnam’s economy 10 Table 2.2: List of 17 members of VAMA 19 Table 2.3: Forecasts of automotive output up to 2020 and Existing and required production capacity up to 2010 20 Table 2.4: Dealers scale 25 Table 2.5: Car model purchase in 2009 26 Table 2.6: Toyota production by region 29 Table 2.7: Toyota sales by region 29 Table 2.8: Estimation of automotive market, Toyota sales and Toyota market share 30 Table 2.9: Market share of VAMA members in 2008 and 2009 31 Table 2.10: Toyota customer profile (Percentage) 34 Table 2.11: An interest rate comparison among Banks and TFSVN 42 Table 2.12: A car loan comparison among typical Commercial local bank (Techcombank), Foreign bank (HSBC) and the Financial company (TFSVN) 42 Table 2.13: Financed portion and Collateral of car loan 44 Table 2.14: Toyota sales and car loan 45 Table 2.15: Car loan at Toyota dealers 46 Table 2.16: Ratio of customer profile 47 Table 2.17: Car loan to individual 48 Table 2.18: Individual Car loan by bank types and TFSVN 49 Table 2.19: Market share of individual car loan by bank type and TFSVN 51 Table 2.20: Loan classification and Provision 55 Table 3.1: Estimated living expense 60 [...]... their wariness of electronic-based payment systems However, bank deposits are rising rapidly, and are forecast to grow at an average rate of nearly 22% a year during the forecast period As a result, the use of debit cards and automated teller machines (ATMs) will also increase Demand for credit remains strong Chapter 2: Car loan at Toyota Dealers & TFSVN Page 17 Growth in bank lending accelerated to an... The finance vehicle is a secured property 1.2.2 Car loan of Banks The local and foreign banks have actively expanded their credit activities, among that especially car loan in both individual and corporate This is one of the main banking activities that bring a significant profit to the banks In addition, the banks promote car loan program in order to meet the increasing need of car buyers that makes... collateral such as a home The relatively high interest rate compensates for the fact that you aren’t guaranteeing repayment of the personal loan with some kind of asset 1.2 Car loan 1.2.1 Car loan Chapter 1: Overview of Car loan Page 2 To purchase an automobile that will be driven predominantly for personal or business Financed amount will include vehicle price and insurance if allowed by regulations... Reputation in the industry, in the working field Fame of the company where customers work for Ability Evaluating customer’s ability in business organization, finance management and other specialist skills such as marketing, sales, finance in order to run and manage their business Finance management Business organization and management Sales & Marketing skills Means Chapter 1: Overview of Car loan Page... construction at the highest rate up to 11.36% (down in last year), electricity-water at 9.02%, mining industry at 7.62%, process industry at 2.67% - Service sector was up 6.63%, higher than general growth rate Chapter 2: Car loan at Toyota Dealers & TFSVN Page 11 2.1.2 GDP per capita Vietnam GDP per capita in 2009 was at USD 1,064 (at exchange rate about 18,118 VND/USD) This was meaningful in many aspects... Vietnam Toyota Financial Services Vietnam Scope of the study: activities of Toyota, Toyota dealers and TFSVN in the period from 2005 to 2009 Methodology of the study: statistics – analysis – summarization The primary data was collected and generated by the author, the research relied on the data from TMV, TFSVN, Toyota authorized dealers, VAMA, the master plan of Vietnam automotive industry and companies... definitions which are applied and referred for analysis throughout the paper: consumer loan, car loan, the risk management model of car loan, credit risk, overdue debt Especially the car loan CAMPARI model shall be figured out as an efficient management way to manage risk and support a better sales performance of the financial company Chapter 2: Car loan at Toyota dealers & TFSVN The overview of Vietnam. .. Brand-new, used car importation and car price decrease have made the automotive market more exciting and lead to stronger car consumption 1.2.3 Common car loan attributes Chapter 1: Overview of Car loan Page 3 Product benefits - Financing customers to purchase and own their favorite car Car Loan provides customers with the financing package to drive the car they've always dreamt of - Documentation, car. .. share Research questions: How is the market? What are advantages and disadvantages, Strength-Weakness-Opportunity-Threat of the company? What is efficient credit risk management? Introduction Page xii What is the orientation of development? 4 The object, scope and methodology of the study Object of the study: Toyota, Automotive industry and market The situation of car loan at Toyota dealers in Vietnam. .. the car loan market more exciting The banks have launched car loan program since 2001 They cooperated with car makers in giving consultancy to customers about the car model and loans that met customer’s need and budget And the banks provide car buyer financial services, with reasonable interest rate, long term, high financed portion, etc After nearly 10 years of implementation, revenue from car loan . and Collateral of car loan 44 Table 2.14: Toyota sales and car loan 45 Table 2.15: Car loan at Toyota dealers 46 Table 2.16: Ratio of customer profile 47 Table 2.17: Car loan to individual. Result analysis: Vietnam automotive industry, Vietnam automotive market, Toyota Motor Vietnam, The situation of car loan at Toyota dealers  Toyota Financial Services Vietnam. An analysis of the. 2.6.1.7 TFSVN s SWOTs 41 2.6.1.8 Car loan comparison among Banks and TFSVN 41 2.6.2 Car loan at Toyota dealers 44 2.6.2.1 Growing proportion of car loan in Toyota sales 44 2.6.2.2 Car loan sales