CHAPTER2:CARLOANATTOYOTADEALERS&TFSVN
2.6.2.1 Growing proportion of car loan in Toyota sales
Alongwiththeeconomicgrowth,developmentofautomotivemarketandincreasingcarbu yer’sneedsinVietnam,financedsaleshasbeenincreasingmorerapidlythanautomotivemar ketgrowth.Thistrendwillleadcustomer’srequirementandexpectationtobemoreandmorecompre hensive,consolidatedandsophisticatedservicestobeprovidedbyTMV,Toyotadealers and TFSVN.
TheVietnameconomyhashadstronggrowth;thisconfidenceisalsostronglysupportedbythe factofsubstantialinflowofinvestmentfromoverseascountriesinpastyears.Wealsobelievethatt herevisedtargetofforeigninvestmentUS$55billionforcomingfiveyearsf r o m 2 0 0 6 t h r o u g h 2 0 1 0 s h a ll b e v e r y f e a s i b l e .
Basedonabovefactorsandanalysis,auto-
financeisconsideredasakeyofthetriggerform o t o r i z a t i o n i n V i e t n a m i n o r d e r t o abso rbm o r e a n d m o r e c u s t o m e r s w h o h a v e s t r o n g needs or desire to own an automotive.
TheproportionofcarloanintotalToyota newcarsalesreached22.0%in2008an dalittlelowerat19.36%in2009duetothefinancialcrisisandhighcreditcriteria.Theproportion sha llbehigherinthefollowingyears.Inthiscontext,itisexpectedthatcustomerand market’s demands for captivefinancingcompany’s services are becoming larger.
Table2.14:Toyotasalesandcarloan Toyotasales
(vehicle) Toyotacarloan
(vehicle) Share
(%)
2008
Jan 1,841 529 28.73
Feb 1,464 277 18.92
Mar 2,326 600 25.79
Apr 2,265 571 25.21
May 2,332 540 23.16
Jun 2,297 395 17.20
Jul 2,441 337 13.81
Aug 2,504 436 17.41
Sep 1,227 236 19.23
Oct 1,700 282 16.59
Nov 1,475 381 25.83
Dec 2,630 805 30.61
TOTAL 24,502 5,389 22.00
2009
Jan 1,059 218 20.59
Feb 1,646 420 25.52
Mar 2,621 565 21.56
Apr 1,425 262 18.39
May 2,005 538 26.83
Jun 2,151 499 23.20
Jul 2,785 489 17.56
Aug 2,949 478 16.21
Sep 2,805 531 18.93
Oct 3,017 545 18.06
Toyotasales
(vehicle) Toyotacarloan
(vehicle) Share
(%)
Nov 3,464 615 17.75
Dec 4,182 668 15.97
TOTAL 30,109 5,828 19.36
2010
Jan 2,212 281 12.70
Feb 1,808 377 20.85
Mar 3,108 634 20.40
Apr 2,006 454 22.63
May 2,050 486 23.71
Jun 2,905 686 23.61
TOTAL 14,089 2,918 20.71
Source: Toyota Motor Vietnam &ToyotaFinancialServicesVietnam 2.6.2.2Carloansales
Customerprofile:Individual,PrivateCompany,GovernmentandStateCompany.Thissh owedthediversityofcustomers,awidemarketandequaldistribution.Amongthecustomerp r o f i l e , c arloanconcentrateinindividualandprivatecompany,accountingforasignificant proportion.
Table2.15:CarloanatToyotadealers
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
2006 INDIVIDUAL - - - - 159 164 173 234 218 207 174 284 1,613
PRIVATECOMPAN
Y - - - - 107 155 203 179 199 212 297 301 1,653
GOVERNMENT - - - - 3 1 0 0 1 0 1 1 7
STATECOMPANY - - - - 6 8 5 4 6 1 2 5 37
TOTAL - - - - 275 328 381 417 424 420 474 591 3,310
2007 INDIVIDUAL 194 175 238 213 184 205 247 230 248 277 298 327 2,836
PRIVATECOMPAN
Y 126 124 142 159 158 201 362 330 324 348 361 301 2,936
GOVERNMENT 0 1 0 1 0 0 0 1 0 1 2 0 6
STATECOMPANY 3 2 0 1 1 1 1 0 4 4 2 0 19
TOTAL 323 302 380 374 343 407 610 561 576 630 663 628 5,797
2008 INDIVIDUAL 304 131 259 265 315 230 175 207 50 156 153 348 2,593
PRIVATECOMPAN
Y 224 144 341 305 223 165 162 228 186 126 227 456 2,787
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
GOVERNMENT 0 1 0 0 0 0 0 0 0 0 1 0 2
STATECOMPANY 1 1 0 1 2 0 0 1 0 0 0 1 7
TOTAL 529 277 600 571 540 395 337 436 236 282 381 805 5,389
2009 INDIVIDUAL 135 247 331 153 245 222 232 233 235 257 307 343 2,940
PRIVATECOMPAN
Y 83 170 228 107 291 269 240 225 291 274 288 319 2,785
GOVERNMENT 0 0 0 0 0 0 3 1 0 0 0 0 4
STATECOMPANY 0 3 6 2 2 8 14 19 5 14 20 6 99
TOTAL 218 420 565 262 538 499 489 478 531 545 615 668 5,828
2010 INDIVIDUAL 156 179 280 192 219 347 1,373
PRIVATECOMPAN
Y 122 190 321 244 263 322 1,462
GOVERNMENT 0 1 1 1 0 0 3
STATECOMPANY 3 7 32 17 4 17 80
TOTAL 281 377 634 454 486 686 0 0 0 0 0 0 2,918
Source:author’sanalysisbasedonTMVandTFSVNdata Individualandprivatecompanyholdsahighratio,thetotalatover98%ofthemarket. T hisisthetargetcustomerandmainmarketthatallbanksandTFSVNfocusonandadjustt h e i r b u s i n e s s s t r a t e g i e s . P e r s o n a l a n d corporatecreditaremajorfieldofactivitiesoft h e b a n k s , req uiringthemostadaptationtothe market,butalsobeflexibletobeabletobring more credittoToyotacarbuyers.Carloanshouldtakeplacequicklyenoughtocarpurchase,delivery a n d c u s t o m e r ’ s n e e d . F o r w h i c h , t h e b a n k s a n d T F S V N h a v e t o c a r r y o u t c r e d i t activities quickly, but also manage risk accordingly.
Table2.16:Ratioofcustomerprofile
2006 2007 2008 2009
Volume
(unit) Share
(%) Volume
(unit) Share
(%) Volume
(unit) Share
(%) Volume
(unit) Share (%)
INDIVIDUAL 1,613 48.73% 2,836 48.92% 2,593 48.12% 2,940 50.45%
PRIVATE COMPANY 1,653 49.94% 2,936 50.65% 2,787 51.72% 2,785 47.79%
GOVERNMENT 7 0.21% 6 0.10% 2 0.04% 4 0.07%
STATE COMPANY 37 1.12% 19 0.33% 7 0.13% 99 1.70%
3,310 5,797 5,389 5,828
Source:author’sanalysisbasedonTMVandTFSVNdata
However,duetothelicenseonbusinessoperationlimitation,intheearlystagesofestablishm entandoperationin2009,2010,TFSVNisnotallowedtoconductcorporatecredit.Thisnarrowsth emarketofTFSVN,achallengesbutanopportunityaswell.Franklyspeaking,thesearestablestepst oprofessionalactivities,stafftraining,workingexperienceaccumulation, good risk management before jointhe corporate credit in the future years.
2.6.2.3Car loan to individual
Since2009,carloantoindividualgainedaveryhighproportion,overhalfoftotalcarloan,when theeconomyfacedmuchdifficultiesdue totheglobalfinancialcrisis.Inwhichcorporatec reditwaslimited,onlypersonalcreditwasavailableinmostofthebank.Inthe lateof 2009,foreignbankslikeHSBCjustrunforpersonalloanandstoptemporarilycorporatec r e d i t . T h e l o c a l b a n k s f o c u s e d o n i n d i v i d u a l c u s t o m e r s , a p p l y i n g a l i t t l e h i g h e r interes tratethanTFSVN,butofferedcustomerotheraddedvalueservices.Theyareinthedirect
competition with TFSVN.
Table2.17:Carloantoindividual CarloantoIndividual
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
2006 - - - - 159 164 173 234 218 207 174 284 1,613
2007 194 175 238 213 184 205 247 230 248 277 298 327 2,836
2008 304 131 259 265 315 230 175 207 50 156 153 348 2,593
2009 135 247 331 153 245 222 232 233 235 257 307 343 2,940
2010 156 179 280 192 219 347 1,373
RatiotoTotalCarLoan
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
2006 - - - - 57.8% 50.0% 45.4% 56.1% 51.4% 49.3% 36.7% 48.1% 48.7%
2007 60.1% 58.0% 62.6% 57.0% 53.6% 50.4% 40.5% 41.0% 43.1% 44.0% 45.0% 52.1% 48.9%
2008 57.5% 47.3% 43.2% 46.4% 58.3% 58.2% 51.9% 47.5% 21.2% 55.3% 40.2% 43.2% 48.1%
2009 61.9% 58.8% 58.6% 58.4% 45.5% 44.5% 47.4% 48.7% 44.3% 47.2% 49.9% 51.4% 50.4%
2010 55.5% 47.5% 44.2% 42.3% 45.1% 50.6% 47.1%
Source:author’sanalysisbasedonTMVandTFSVNdata
Moreover,theglobalfinancialcrisisoccurredin2008and2009,enterprisesreportedloss,andthi sisoneofthereasonthebankdonothaveenoughproofforloanapproval.Inthisc o n t e x t , T F S V N e m e r g e s a s a g o o d c r e d i t o r withl o w r a t e , q u i c k d i s b u r s e m e n t , a n d considerate consultancy. This wasabigadvantage for dealers and Toyota car buyers.
2.6.2.4Individual carloanbyBanktypesandTFSVN
Thestrongriseofjointstockbanksshowstheactiveflexibilityofthesebanks,thosearemaincom petitorsofTFSVN.Thelocalbanksaredominatedbythefundingrate,theirinterestrateisalittlehighe rthanTFSVNbuttheyapplyflexiblecreditstandardsandnotastightasT F S V N orforeignbankslik eHSBC.Creditdecisionisissuedquitefast,insomecasewithinthedaytheyreceiveddocume ntorthefollowingdayatthelatestorpreferentialrateforloyalcustomers.Inriskmanagement,int heworstsituationofdefault,thebankkeepstheoriginalvehicle register and sells the secured asset to return their loan.
Moreover,thedynamicactivitiesofthejointstockbanksalsoshowinmanypromotionalcampaig nsina yearandofferinga commissionf o r d e a l e r ’ s s a l e s p e r s o n s . O t h e r f o r e i g n ban kslikeHSBC,ANZ,UOBactivelytrytotakebackthemarket,increasingtheirsharebyadjusting theircreditstandards,preferentialrate,quickcreditdecision,fastdisbursementforcardelivery andotheraddedvalueservices.TFSVNisawareofthatithasmanycompetitorsinthemarket,andit mustimproveitsoperation,createcomparativeadvantages,trainstaffbem o r e p r o f e s s i o n a l , l a u n c h p r o m o t i o n s , e t c t o a t t r a c t a n d retaincustomers.
Table2.18:IndividualCarloanbybanktypesandTFSVN
Unit: financed vehicle Foreign Banks Joint Stock
Banks
Joint Venture Banks
State Owned
Banks TFSVN TOTAL
2008 Dec 25 213 5 65 15 323
2009
Jan 11 91 4 19 10 135
Feb 21 151 6 42 27 247
Mar 21 175 8 51 76 331
Apr 6 88 2 20 37 153
Source:author’sanalysisbasedonTMVandTFSVNdata 1
1
No.ofLoans Dec-08Jan-09 Feb-09 Mar-09Apr-09May-09 Jun-09Jul-09 Aug-09 Sep-09Oct-09 Nov-09Dec-09 Jan-10Feb-10 Mar-10 Apr-10May-10 Jun-10
250 200 50 00 50 0
Month
Foreign Banks Joint Stock Banks Joint Venture Banks State Owned Banks TFSVN
Foreign Banks Joint Stock Banks
Joint Venture Banks
State Owned
Banks TFSVN TOTAL
May 6 159 1 10 69 245
Jun 14 118 3 26 61 222
Jul 16 104 2 24 86 232
Aug 9 128 3 18 75 233
Sep 16 128 2 29 60 235
Oct 17 142 6 27 65 257
Nov 19 144 9 36 99 307
Dec 41 136 6 30 130 343
TOTAL 197 1,564 52 332 795 2,940
2010
Jan 10 71 1 12 62 156
Feb 9 84 1 29 56 179
Mar 19 124 3 30 104 280
Apr 15 99 2 24 52 192
May 17 122 4 27 49 219
Jun 22 207 4 42 72 347
TOTAL 92 707 15 164 395 1,373
Source:author’sanalysisbasedonTMVandTFSVNdata Figure 2.14: Individual carindividualloanbybanktypeandTFSVN
Source:author’sanalysisbasedonTMVandTFSVNdata
TFSVNonlyprovideindividualloantocarbuyers.NumberofTFSVNdisbursementisincr easingovertime,justfrom15disbursementsinthefirstmonthto104onesinMarch2010.The
average disbursement in 2009 is about 7 0 u n i t s / m o n t h a n d b e
e x p e c t e d t o g e t
1 0 0 units/monthin2010.TheTFSVN’sdisbursementisbasedonsalesof Toyota,salesof everydealer,salesofeveryregiontheNorth-Central-
South.However,theautomotivemarketisinthelowseasoninAprilandMay2010,affectingthecomp anyperformanceandtheannual business target.
Table2.19:MarketshareofindividualcarloanbybanktypeandTFSVN
Unit:%
Foreign Banks Joint Stock Banks
Joint Venture Banks
State Owned
Banks TFSVN
2008 Dec 7.74 65.94 1.55 20.12 4.64
2009
Jan 8.15 67.41 2.96 14.07 7.41
Feb 8.50 61.13 2.43 17.00 10.93
Mar 6.34 52.87 2.42 15.41 22.96
Apr 3.92 57.52 1.31 13.07 24.18
May 2.45 64.90 0.41 4.08 28.16
Jun 6.3 53.15 1.35 11.71 27.48
Jul 6.90 44.83 0.86 10.34 37.07
Aug 3.86 54.94 1.29 7.73 32.19
Sep 6.81 54.47 0.85 12.34 25.53
Oct 6.61 55.25 2.33 10.51 25.29
Nov 6.19 46.91 2.93 11.73 32.25
Dec 11.95 39.65 1.75 8.75 37.90
TOTAL 6.70 53.20 1.77 11.29 27.04
2010
Jan 6.41 45.51 0.64 7.69 39.74
Feb 5.03 46.93 0.56 16.20 31.28
Mar 6.79 44.29 1.07 10.71 37.14
Apr 7.81 51.56 1.04 12.50 27.08
May 7.76 55.71 1.83 12.33 22.37
Jun 6.34 59.65 1.15 12.10 20.75
TOTAL 6.70 51.49 1.10 11.94 28.77
Source:author’sanalysisbasedonTMVandTFSVNdata
Source:author’sanalysisbasedonTMVandTFSVNdata
MarketShare Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10
80%
70%
60%
50%
40%
30%
20%
10%
0%
Month
Foreign Banks Joint Stock Banks Joint Venture Banks State Owned Banks TFSVN
Figure 2.15: Market share ofindividualcarloanbybanktypeandTFSVN
Source:author’sanalysisbasedonTMVandTFSVNdata TFSVNfirstcontactedtheSBVforafeasibilitystudyonpossiblecarfinancingbusinessinViet namin2003,cameintooperationfromNov2008andbegandisbursinginthefollowingmonth,duringth isperiodthemakersharedifferencebetweenTFSVNandjointstockbankwasabout60%,4.64%vs.65.
94%.Inthistime,jointstockbankactivitiesarestrongandgott h e largestshareinToyotadealer s.Inahard timewithafuriouscompetition,TFSVNwas born and face so many difficulties and challenges.
Disbursementrevenueandmarketshareof TFSVN was increasing by month; to the endof 2009 market share of the company was equaltothat of joint stock banks. This shows thatTFSVN hadagreat attempt to work, attract
andretaincustomer,promotingitsservicestoallToyotacarbuyers.
TFSVN’sproductwasdesignedforToyotaandforVietnammarket.TFSVNobserv edthemarketandchangeitselfaccordinglytoanychangesofthemarket,thecompetitors,and
thecustomers.In2010,marketshareofthecompanyareexpectedtodominatethemarketofindi vidualtofinanceToyotacar.
CorrespondinglyTMV,ToyotadealersandTFSVNhavebeenjointlyexertingtheirbesteffo rtstomeetsuchrequirementsandexpectationswiththemostimportantconceptofCustomerSatisf action.Inthisregard,TFSVNhasbeen increasingitsexposureandroleforcomprehensivecust omercarefrominitialstageofpurchasingacartodailyuse,andultimatelycustomer’sreplacementofhi scarthroughcontinuouslyextendinga carloantos u c h customer.Ontopofnewcarfinancingsch eme,TFSVNshallprovidefinancialservicesto used car buyers as well.
2.6.3TFSVN’s prudential ratios
Aspartofitscreditriskandliquidityriskmanagement,TFSVNwillcomplywiththeSBVr e g u l a t i o n s o n p r u d e n t i a l r a t i o s , namelyD e c i s i o n 4 5 7 / 2 0 0 5 / Q D -
N H N N d a t e d 1 9 A p r i l 2 0 0 5 providing regulationsonprudentialratiosinoperationsofcrediti nstitutionswhichwasamendeda n d supplementedbyDecision03/2007/QD-
NHNNd a t e d 1 9 January2 0 0 7 o f t h e SBV.T h e p r u d e n t i a l ratiosunderthecurrentregulati onsare:CapitalAdequacyRatio(CAR),Creditlimitto customers, Payment liability, Short-term capital for medium to long term lending
2.6.3.1Capital Adequacy Ratio
AsrequiredbytheSBV,theminimumCARasequityovertotalassetsincreditatriskis8%.
TFSVN’s estimation for the first three operating years:
2008 2009 2010
TFSVN’s CAR 90.1% 44.7% 43.4%
TFSVNw i l l e x c e e d t h e r e q u i r e m e n t s o f t h e S t a t e B a n k o f V i e t n a m i n c a p i t a
l adequacy. Thisisduetothehighcapitalrelativetoexpected
lending,andriskmanagementtechniques employed to meet Vietnam requirements.
2.6.3.2Credit limit to customers
AccordingtoSBV’sregulations,limitsonlendingandprovidingguaranteesofTFS VNmust be satisfied the following conditions:
ThetotalbalanceofloansmadebyTFSVNtoasingleclientshallnotexceed15% o f the equity of TFSVN.
Thet o t a l a m o u n t o f l o a n s m a d e a n d guaranteesp r o v i d e d b y T F S V N t o a s i n g l e clientshallnotexceed25%oftheequityofTFSVN.
Thetotalbalanceof loansmadebyTFSVN toa groupofrelatedclientsshallnotexcee d50%oftheequityofTFSVN,ofwhichtheamountofaloantoanyoneclientshall not exceed 15% of the equity of TFSVN.
ThetotalamountofloansmadeandguaranteesprovidedbyTFSVNtoagroup ofrelated clients shall not exceed 60%of the equity of TFSVN.
TFSVN’s estimation forthe first three operating years:
2008 2009 2010
TFSVN’s creditlimits to singlecustomers (listed in VND)
Loan 41,015,623,380 44,975,905,731 77,606,093,868 Loans &
Guarantees 68,359,372,300 74,959,842,884 129,343,489,780 GroupLoans 136,718,744,599 149,919,685,768 258,686,979,559 Group
Loans&Guarante 164,062,493,519 179,903,622,922 310,424,375,471 TFSVNhascounterpartycreditriskpoliciestoensurecreditlimitstocounterpartydoesnote xceedStateBankofVietnamrequirements. TFSVNwillnotlendinexcessoftheser e q u i r e m e n t s t o a s i n g l e o r g r o u p c o u n t e r p a r t y .
2.6.3.3Payment ability
SBV’sregulationsrequiredTFSVNtomaintainregularlythepaymentabilityratioapplicab letoeachtypeofcurrencyandtogoldasfollows:
Aminimum25%ofassetsincreditwhicharecapableofbeingpaidoutimmediately,t oassetsindebitwhichwillmatureforrepaymentwithinthenextfollowingmonth.
Am i n i m u m r a t i o e q u a l t o o n e b e t w e e n t o t a l assetsincreditwhicharecapableof beingpaidoutimmediatelywithinthenextsevenworkingdaystototalassetsindebitwhich are liable to be paid out within the next seven working days.
TFSVN’s estimation forthe first three operating years:
2008 2009 2010
TFSVN’s payment ability ratio 553% 27% 30%
TFSVNwillmaintainahigherpaymentabilityratiothroughhighliquidpositionaswellas a mixed debt portfolio.
2.6.3.4Short-term capital for medium to long term lending Themaximumratioofshort-
termcapitalfundswhichTFSVNshallbepermittedtousetoprovidemediumandlong- termloansshallbe30%.
TFSVN does not plan to have:
Demanddepositsandtermdepositsduewithin12monthsfromorganizations(inc ludingothercreditinstitutions)andindividuals;
Demands a v i n g s d e p o s i t s a n d t e r m savingsdepositsduewithin1 2 m o n t h s f r o m individuals;
Funds mobilized under the form of issued short-term valuable papers; and
Surplusofborrowingsfromothercreditinstitutionsandloanstothesecreditinstitutions with a term of less than 12 months.
2.6.4Loan classification and Provision