Toyota earmarks P1-B for financing unit

Toyota Motor Philippines Corp. (TMP), the country’s leading automotive assembler, has earmarked P1 billion for the establishment of a financing arm to further boost its sales.

The new company, named Toyota Financial Services Philippines Corp. (TFSP), was given the green light by the Securities and Exchange Commission to operate as a financing company following its compliance with the registration and capital requirements under the Financing Company Act of 1998.

Owing to the critical role of financing in its sales, Toyota has decided to put up a separate company that will centralize all financing requirements of its dealers nationwide.

With an authorized capital of P1 billion, the new firm will make it among the top three financing companies in the country today. Among those that have already established a presence in the financing industry are the People’s Credit and Financing Co., PCI Leasing Finance Corp., UCPB Leasing and Finance and LBP Leasing Corp.

As a new company, TFSP will initially seek to penetrate the market through strong customer service and offer competitive products through its strategic tie-up with TMP. The company will bring over its expertise in the field of vehicle financing and dealer support.

TFSP has no immediate plan to set up branch offices as it plans to concentrate on the Metro Manila market in its first three years of operation.

In the last two years, a steady growth in bank financing has kept the auto industry afloat amid weak consumer confidence and internal troubles facing the assemblers.

Roughly 70 percent of the loans last year extended by thrift banks, notably Philippine Savings Bank, BPI Family Savings Bank and RCBC Savings Bank. All three banks are controlled by business groups that have interests in vehicle assembly – PSBank’s George Ty (Toyota), BPI’s Ayala (Honda); and RCBC’s Yuchengco (Honda).

Banks were spurred to lend to new vehicle buyers as assemblers agreed to subsidize part of the financing costs on top of the discounts and freebies they give to attract more people into their dealer showrooms. Assemblers used their close ties with the country’s major banking groups as leverage to gain more access to financing schemes.

Auto financing is said to be the "fastest and easiest" way to ramp up a bank’s loan portfolio because the risks are more manageable and well spread.

With the continuing low interest rate environment, car assemblers have been aggressive in marketing products through newspaper advertisement of easy financing schemes from zero interest rates, low down and low monthly payments, hefty discounts, interesting freebies, including insurance and registration, and up to six years of financing.

This, coupled with the release of new models, has given the industry a much needed boost as it moves close to a full recovery starting next year.

Latest data from the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) showed positive results for the industry as sales climbed 8.3 percent to 46,135 units for the period January to July this year from 42,604 units during the same period last year.

Toyota was number one in the first seven months this year with a market share of 30 percent or 13,854 units. Mitsubishi Philippines Corp. was second with 9,232 units sold or 20 percent market share. Occupying the third slot was Honda Cars Philippines Inc. (14 percent) followed by Isuzu Philippines Corp. (13.2 percent).

Toyota is projecting a 10-percent growth in sales this year to 22,000 units from 19,894 last year.