New Players Invigorating Mexican Auto Financing Landscape

Following the pandemic, the automotive credit market in Mexico has experienced a significant rebound. Several factors have contributed to this resurgence, including the entry of over 20 Chinese automotive brands that have invigorated sales with competitive pricing and diverse sales strategies. In this evolving landscape, established leasing companies like BitCar are expanding their offerings to enhance vehicle accessibility for a larger segment of Mexicans, giving them the possibility of choosing the financial product that best suits their needs to access a vehicle.

Credit financing remains the preferred method for Mexicans when purchasing a car. Although the pandemic caused a notable decline in automotive credit usage compared to leasing and self-financing, the sector has been recovering strongly since 2023.

From January to May 2024, 59.4% of light vehicles purchased in Mexico were financed through automotive loans, according to the Mexican Association of Automotive Distributors (AMDA) and JATO Dynamics. This represents a total of 407,380 vehicles, marking a 19.1% increase compared to the same period in 2023, adding 59,192 units. This growth rate is nearly identical to the pre-pandemic increase seen in 2016 when the sector grew by 19.9%.

This positive trend has been partly driven by the influx of Chinese brands, which offer highly competitive prices. Depending on the vehicle model, prices from these brands can be 36% to 50% lower on average. According to the BitCar Chinese Heat Map from November 2023 to May 2024, the number of Chinese brands operating in Mexico grew by 32%. This influx has even positively impacted sectoral inflation, which stood at 1.96% in the first half of April, well below the national rate of 4.6%, according to AMDA.

Market Players

The main players in the car loan sector include financial entities of major manufacturers (Captives) and banks. In the first five months of this year, Captives accounted for 79.38% of the financed units, banks 19.22%, and self-financing represented 1.40%.

According to the Bank of Mexico, the automotive credit portfolio saw an annual increase of 24.13% in March, marking 23 consecutive months of growth. Despite inflation remaining above the desired 3% and the reference rate being held at 11%, vehicle acquisition through credit continues to show positive trends. Additionally, the Bank of Mexico reported that the balance of automotive financing reached MX$251 billion (US$13.5 billion) in April 2024, a 43.5% increase from the same month in 2023, marking the highest growth in over 12 years. 

New Players and Offerings

Since launching the BitCar platform in May 2022, we have observed that credit products resonate more with Mexicans compared to leasing options. The desire to own a vehicle is deeply embedded in Mexican culture.

In response, we have introduced a traditional credit option to complement our existing pure and financial leasing products. This diversification positions BitCar as the first digital platform in Mexico to offer the main financial products for vehicle acquisition — pure leasing, financial leasing (Rent To Buy), and credit. This comprehensive offering empowers users to choose the financial product that best meets their needs, all within a unique digital experience and a multibrand service encompassing all models available in Mexico.

BitCar's credit product offers terms ranging from 12 to 60 months, with benefits such as a preferential rate of 16.5%, car insurance, life and unemployment insurance, substitute car service, and GPS. Additionally, the product allows for applicable tax deductions.

Purchasing a car is typically the second most significant investment for a family. Therefore, it is crucial that users can choose the financing method that best suits their circumstances, needs, and values. Some prefer owning their car, while others enjoy using it without the responsibilities of ownership. From the financial sector's perspective, we aim to expand the range of options available and let Mexicans decide on their preferred product.

It is important to consider that, given the arrival of Chinese brands, the financial scenario also changes, and new competitors emerge, along with BitCar, which give impetus to the financing segment. 

Conclusions

The first half of this year has been positive for the sector and the coming months are expected to be a transition period with changes at the government level in both Mexico and the United States. New Chinese brands will begin operations in the country in the second half of 2024 and continue to give a boost to the industry. In the financing sector, at BitCar, we are expanding our financial products to ensure that a greater number of Mexicans can access a vehicle considering their needs and values. Our goal is to represent 5% of the units sold in the country in the medium term and we expect to continue growing as we have done until now with our 100% digital financing proposal that integrates financial technology solutions and ensures the best user experience.