Move aimed as a first stage for expanding its Asean business model under the AEC
Ayudhya Capital Auto Lease, better known as Krungsri Auto, believes it will enjoy a healthy profit margin from its expansion into Laos by the end of this year despite the country’s small population.
Managing director Pairote Cheunkrut said the operation in Laos would provide good lessons for the company that it could apply elsewhere in Asean.
“The small population in Laos is not a problem for offering auto loans. Laos is the first stage of Krungsri Group’s ASEAN business model. We should use trial and error to learn how we can adjust our plans when the ASEAN Economic Community is fully realised,” he said.
Krungsri Group (Bank of Ayudhya and its subsidiaries) assigned Krungsri Auto and Krungsri Consumer to conduct the pilot project to broaden the Krungsri brand and products to ASEAN through a joint venture named Krungsri Financial Service, owned 35:35:30 by Ayudhya Capital Services, Krungsri Auto and the local partner respectively.
Krungsri Auto is Thailand’s second-largest auto lender by portfolio, and this year it plans to expand its total loan portfolio by 20 per cent to Bt239 billion.
Pairote said Krungsri Auto was reviewing the first-year operation plan for the Laos venture, including the loan target. Its staff in Laos is working with auto dealers there before finalising the amount.
The company believes it will be able to meet its performance targets in the first year because pricing competition is not as much of a factor in Laos as in Thailand, while the interest rates in Laos are higher, he said.
The low number of lenders in Laos has opened opportunities for Krungsri Auto to create marketing campaigns. Even though Laotians prefer to pay cash for vehicles, the company will offer high down payments with short-term instalment plans to attract customers who might have only half of the cash they need, Pairote said. The high down payment will ensure the quality of customers and prevent bad debts, hence providing auto loans in Laos entailed low risk, he explained.
According to the plan, Krungsri Financial Service should be in business in Laos by the fourth quarter, and will focus only on new four-wheel vehicles. After exploring the new-car market, the company will consider expanding to used-car and motorcycle loans.
Source: The Nation