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According to global automotive outlook symposium federal reserve bank, automotive industry volume tops production of 95 Mn in 2018, and projected to reach 97 Mn in 2019, based on solid economic evolution. Automotive Finance is the financial services provider (OEMs, Banks, and Financing Institutions) that allows customers to own a vehicle without paying a lump sum payment to the dealership. However, the customer can borrow the money from a financial service provider and then pay it off in installments. Customer and a financial services provider enter into a contract where customers buy a vehicle, agree to pay the amount financed, plus an interest charge over some time. Financial services provider is either a part of banks or amalgamated with an automobile company.
The rise in the demand for electric (EVs) and autonomous vehicles, the rising adoption of e-commerce business platform are expected to fuel the growth of the global automobile finance market. Further, investment in e-commerce application in automobile finance market is projected to exceed US$ 200 Bn by 2026. For instance, in January 2018, Nissan automotive finance collaborated with auto gravity Corporation, an automotive shopping and financing platform with an aim to offer consumers select any Nissan vehicle and get finance offers from NMAC (Nissan Motors Acceptance Corporation) within minutes on their mobile device.
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The key players of the global automotive finance market are BANK OF AMERICA, HITACHI CAPITAL ASIA-PACIFIC, Ford Motor Credit, M&T Bank Corporation, Toyota Financial Services, Volkswagen Financial Services, HDFC Bank, HSBC, Hudson City Bancorp, Inc., Wells Fargo, Mercedes-Benz Financial Services, General Motor Financial Company among others.
Segmentation of the Global Connected Automotive Finance Market
By Loan Provider
· Financing institutions
By Service Type
· New vehicles
· Used vehicles
By Industry Verticals
· Residential Use
· Commercial Use
· Government Use
· North America (the USA and Canada)
· Europe (UK, Germany, France, Italy, Spain, Scandinavia and Rest of Europe)
· Asia Pacific (Japan, China, India, Australia, Southeast Asia and Rest of Asia Pacific)
· Latin America (Brazil, Mexico and Rest of Latin America)
· Middle East & Africa (South Africa, GCC and Rest of the Middle East & Africa)
Based on geography, North America is expected to support the growth of the market, as an investment in automotive finance in the North America region is expected to reach US$ 1.2 Tn by 2025. Further, global players in this market are focusing on strategic mergers and collaboration with key players in North America to maintain the growth in the forecast period. For instance, in Jan 2017, M&T Bank Corporation acquired Hudson City Bancorp Inc., with an aim to strengthen the growth of auto finance business in North America. As a result of this acquisition, M&T Bank Corporation gains an overall profit of US$ 275 Mn in just the first quarter of 2018. Furthermore, Europe is also expected to hold a strong position in the global automotive finance market. In 2018, more than US$ 215 Bn was invested by European companies in this market for the development of finance development projects.
Key Industry Developments
· In Jan, 2019, Volkswagen AG and Ford Motor Co announced their partnership that combines forces of the auto finance market and is likely to invest and expand into joint development of electric and self-driving technology.
· In Oct, 2018, Tesla introduced Software Version 9.0, enabled with AI technology to offer M2M connectivity, advanced radar, and GPS sensors allowing the drivers to navigate on autopilot.
· In May 2018, Volkswagen Financial Services Fleet launched an online WLTP (Worldwide Harmonised Light Vehicle Test Procedure) calculator enabled with blockchain technology that will help to calculate a before and after cost comparison for vehicles and eliminate intermediate dealers.