Tài liệu 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 --  -- NGUYEÃN HOAØNG DUY DEVELOP CAR LOAN AT TOYOTA DEALERS IN VIETNAM A CASE STUDY OF TFSVN MAJOR MAJOR CODE : : BANKING 60.31.12 MASTER’S THESIS THESIS INSTRUCTOR: DR. A. PR. PHAÏM VAÊN NAÊNG 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. Phaïm Vaên Naêng, my thesis instructor. I’m 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. Nguyeãn Hoaøng Duy ii DECLARATION OF THESIS Author’s full name : Nguyeãn Hoaøng Duy Date of birth : 11th January 1982 Thesis title : Develop Car Loan at Toyota Dealers – A Case Study of TFSVN Thesis instructor : Dr. A. Pr. Phạm Văn Năng 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 1.2 Consumer loan .............................................................................................................. 1 1.1.1 Consumer loan..................................................................................................... 1 1.1.2 Personal loan ....................................................................................................... 1 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 2.2 2.3 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 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 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 2.4 2.5 2.3.3 Finance and supporting policies ........................................................................ 21 2.3.4 The automobile markets in East Asian countries and Vietnam ......................... 21 Toyota Motor Vietnam ............................................................................................... 23 2.4.1 Introduction ....................................................................................................... 23 2.4.2 Toyota dealer network ...................................................................................... 24 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 2.6 Toyota customer profile .................................................................................... 34 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 3.2 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 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 ix LIST OF FIGURES Figure 1.1: Car loan process .................................................................................................... 4 Figure 1.2: Types of credit risks and affect ............................................................................. 7 Figure 1.3: Days of overdue and ratio of return ...................................................................... 9 Figure 2.1: Vietnam’s GDP per capita .................................................................................. 11 Figure 2.2: Export-Import Growth Rate (%) .......................................................................... 13 Figure 2.3: The system of credit institutions in Vietnam ....................................................... 14 Figure 2.4: Automobile market size in Asian countries in 2009 ............................................ 22 Figure 2.5: Establishing Solid Foundation ............................................................................. 24 Figure 2.6: Vietnam market segment movement in FDI automakers 2007-2009 ................. 27 Figure 2.7: Circle of Vietnam automotive industry ............................................................... 28 Figure 2.8: Toyota market share during 2000-2009 .............................................................. 31 Figure 2.9: Market share of VAMA members ...................................................................... 32 Figure 2.10: Toyota sales from Jan to Jun 2010 .................................................................... 33 Figure 2.11: Customer profile ............................................................................................... 35 Figure 2.13: TFSVN’s lending process.................................................................................. 40 Figure 2.14: Individual car individual loan by bank type and TFSVN .................................. 50 Figure 2.15: Market share of individual car loan by bank type and TFSVN ......................... 52 Page x INTRODUCTION 1. Rationale of the study In recent years, the world and Vietnam economy faced so many difficulties due to the financial crisis and the threat of economic recession. Economical difficulties have posed tremendous effects on the world and domestic automotive industry, globally vehicle sales were much lower than previous years, and some big car makers announced loss and are at the verge of bankruptcy. However, rescue plans and economic packages of many countries and Vietnam have brought optimistic signs for the economy and people’ lives. We have the right to believe in that the crisis or difficulties would end soon and people’ lives are better. With statistics of past years, financial service sector has been improving and Toyota financed cars has been increasing in Vietnam by years. Toyota Financial Services Vietnam (TFSVN) was established in the context of not only difficulties but also opportunities. TFSVN’s financial products and services are designed for Toyota and for Vietnam market. Those are innovative, which were developed from global experiences of Toyota Financial Services Corporation (TFSC), and consider Vietnam’s practical elements. The establishment of TFSVN is to support Toyota, increasing its market share in Vietnam, to bring car buyers another opportunity to own their desired cars. All is for Vietnamese prosperous lives and the success of Toyota authorized dealers. As credit institutions, TFSVN care profit and consider it a motivation for a better performance generally. Credit is one of key business activities, which bring main income or profit to the company. However, this kind of activity is the most risky with bad consequences such as increasing costs, low revenue or loss, bad financial capacity and finally damage the company image and reputation, even bankruptcy. Credit risks always accompany with credit activities and cannot be eliminated completely, but only prevented or minimized by efficient risk management policy. Introduction Page xi At TFSVN, the setting up and implementing credit risk management policy is a necessity, together with possible strategies, in order to improve the competitiveness. That’s why I chose the topic “Develop car loan at Toyota dealers in Vietnam – A case study of TFSVN” 2. Definition of the problem  Consumer lending, car loan attributes  Credit risk elements, types of risk  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 company, in order to improve the company’s competitiveness and minimize risk 3. Research questions & objectives The objective of the thesis is to understand the issues of TFSVN and then we can find out strategic solutions to improve competitiveness and credit risk management.  Research objectives:  Study on risks and risk management in providing credit services to Toyota car buyers.  Possible strategies of credit services and products.  To increase Toyota sales volume and its market share.  To increase the company’s profit and market 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.  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. Moreover, the secondary data was from policies and decisions of government, relevant ministries, newspaper, former researches, etc. The author also exchanged ideas with experts in finance and automotive industry about car market, car loan, credit risk management and the market trend. 5. Significance of the study Toyota is the first car maker in Vietnam which launched financed car services of its own. TFSVN is the 33rd financial company of TFSC in the world. The pioneer position gives Toyota and TFSVN not only opportunities to develop but also difficulties and challenges. The success of TFSVN is the motivation which local and foreign banks in Vietnam compete with and other car makers shall plan to establish their financial company of their own. In the coming time, in addition to individual loan, the company expands to corporate loan. Those experiences and success will open a way to the future ahead. 6. Structure of the study Introduction Page xiii Introduction of the study Introduction is about the research, including background, the problems to be solved, research rationale, introducing its scope, methodology, and the significance of the study. Chapter 1: Overview of car loan The chapter is a review of some theories and 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 economy, some relevant issues of the economy; introducing a general picture of background for the company’s business, in particular the banking sector and needs for potentials of consumer finance. The analysis in the chapter: Vietnam automotive industry and market, Toyota, the situation of car loan at Toyota dealers and TFSVN’s establishment and its sales performance. To highlight the situation and the background where TFSVN was established and came into operation. The purpose of analysis is to define problems and opportunities TFSVN have and what to do to in the future. This chapter concentrated on sales performance, a comparison among TFSVN and other banks. This would bring the reader a clear picture of the car loan market at Toyota dealers, and so that we can find out solutions to success for TFSVN in the next chapter. Chapter 3: Recommendations for TFSVN In this chapter, we work out the credit risk management and the orientation of development for TFSVN. And then a conclusion on all what we have discussed and a possibility for any further research on thesis topic. Introduction Page 1 CHAPTER 1: OVERVIEW OF CAR LOAN 1.1 Consumer loan 1.1.1 Consumer loan The division of retail banking that deals with lending money to consumers. This includes a wide variety of loans, including credit cards, mortgage loans, and auto loans, and can also be used to refer to loans taken out at either the prime rate or the sub prime rate. 1.1.2 Personal loan Money loaned to individuals (usually on non-secured basis) for personal, family or household purposes; as opposed to business or commercial lending. It’s also called consumer credit or consumer lending. A personal loan is an unsecured loan, meaning the borrower does not put up any collateral or security to guarantee the repayment of the loan. For this reason, personal loans tend to carry high interest rates. If a borrower owns a home, a lower interest rate alternative is a home equity loan. However, this option requires that the borrower put up his or her home or other real estate property as collateral. A loan, whether a personal loan or another type of loan, is typically used to finance a large, one-time purchase or expense. The borrower is given all the money at once and agrees to pay back a certain amount per month until the debt is repaid. The monthly payment includes both principal (the amount you borrowed) and interest. Personal loans tend to carry higher interest rates than loans secured by 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. 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 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 holds a significant part of the bank’s total profit. The banks actively work with auto manufacturers to launch promotion, preferential interest rate or promotional gifts to customers. This partnership is to promote car sales and expanding the banks’ customer database. For example, from 15-Mar to 30-Apr-2010, Techcombank in cooperation with MercedesBenz Vietnam conducted a promotional campaign. Among that, the bank shall provide Mercedes-Benz car buyers a preferential interest rate for the first 12 months of the loan term, 7.99%/year for sedan or under 7-seat vehicles and 11.9%/year for Sprinter (16-seat vehicle). Besides brand-new car loan, several banks financed used car after the government allowed used car importation. This service has been very potential and expected to develop strongly in the future. 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 register are in customer’s name. - Fast and easy arrangement of loans, simple application and quick credit process. - Monthly or periodical repayment to the banks or the financial companies.  Application criteria  Individual: Vietnamese, or foreigner residents, or overseas Vietnamese: age from 18 to 65, monthly income can cover the monthly repayment  Business enterprise: operating business at least 2 years  Product attributes  Currency: VND  Loan term: max 4 or 5 years  Financed portion: usually 70% of car price at common, max possibly to 100% of car price, that depends on borrower’s demand, financial capacity and loan term  Secured asset: the financed car or real estate  Repayment mode: interest calculation on declining balance  Periodical repayment: monthly interest and principal  Fee and charge: according to SBV and the bank’s current regulations  Document required for application Individuals  Identification card  Household registration book/ Temporary residence book  Marital Status Certificate  Car purchase contract  Proof of income  Copy of other asset ownership certificates (if any) Chapter 1: Overview of Car loan Page 4 Business enterprise  Business license  Company charter  Board of Resolution  Identification card and household registration book of Committees  VAT report of the last 6 months  Tax report of the most recent year  Car purchase contract  Bank statement of the last 6 months (if any)  The loan procedure  The car dealer signed purchase contract with car buyers and transfer the contract and customer information to the bank  The bank collected documents, investigating and making credit decision  Customers made down payment to the car dealer and the car dealer commence the process of car registration  The car dealer sent receipt of car register to the bank for disbursement  After disbursement, the bank collected original documents and worked with customer for monthly repayment Figure 1.1: Car loan process TFSVN/ Bank Disbursement Loan Monthly repayment Dealer Car delivery Customer Source: author’s collection Chapter 1: Overview of Car loan Page 5 1.3 CAMPARI Model – The Risk management model of Car loan CAMPARI stands for Character – Ability – Means – Purpose – Amount – Repayment Insurance  Character Basic characteristics of customers who are honest, determined, transparent in loan payment. Manner of payment on previous and existing obligations is important because it is a very strong indication not only of ability to pay but also of responsibility. Applicants with records of collection cases, repossessions, bankruptcy, swindling, bounced checks or even serious personal problems are normally rejected.  Resume of borrower: name, age, education, family, former profile  Payment history  Stability of residence  Life style  The honesty in making the application and providing information  Access Credit Information Centre (CIC)  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