The collapse of Peer2Peer lending platforms in China is having reverberations across various consumer spending sectors, none more than Auto sales. Auto sales declined for the third month straight falling over 7.4% in August, after falling 5.5% in July and 5.3% in June.
Source: Wind Info. / China Passenger Car Association. WSJ
In China people often rely on various forms of credit for Auto purchases. With Beijing’s recent crack-down on shadow banking, with main focus on P2P lenders, Autos have been hit and might continue to get hit.
P2P Lending became legal in 2015, with number of platforms growing to over 8,000 by 2017 according to China’s Central Bank. The government started to crack-down on these platforms, and closed down more than 5,700 by May this year. The crack-down completely destroyed the auto sales market in China.
Autonews China writes;
Bernstein also estimates that car loans from peer-to-peer lenders contributed 9 percent of new-car sales in China last year. Drawing on the statistics provided by wdjz.com, Shanghai-based Shenwan Hongyuan Securities, a major Chinese securities firm, believes the contribution rate from peer-to-peer lenders to new-vehicle sales was somewhere between 10 and 15 percent.
In June, auto loans provided by P2P platforms in China plunged 29 percent from a year earlier to 16.5 billion yuan ($2.4 billion), according to wdzj.com.
Beyond local players such as Great Wall Motors (2333 HK), Guangzhou Automobile (2238 HK) and Geely (0175 HK) which have all dropped substantially this year, the effect is also hitting international players. For example General Motors (GM US) which is the biggest foreign brand in China, sold over 4m units in 2017, German Giant Volkswagen (VOW GY) sold over 3m in 2017 and Toyota (TM US) sold over 1.1m units. This is substantial as plenty of international auto companies have pinned their growth on massive increase sales in China over the next couple of years.
In addition, beyond trading the Auto OEMs which has exposure globally, you can also look at online platforms for car-sales in China such as Autohome (ATHM US) and Bitauto (BITA US), which are listed in the US, and offer trading opportunities for the second derivative plays.
Below is a chart of various car makers, the European auto index (SXAP) and Bitauto.