Abstract
Stricter EU Regulations with regard to Value-added Taxes on Car Purchases and Insurance Products
Pose Strong Challenge
Recently introduced regulations on value-added tax (VAT) pose challenges to the growth of car
sales and financing in the European Union (EU) and are causing a sharp decline in borrowing trends
due to decreasing customer confidence. The primary challenge facing finance companies is to
structure and provide alternative finance products, including insurance, to ease tax concerns. For
instance, innovative promotions such as free gap insurance products and low and deferred monthly
payment options are expected to alleviate customer concerns and boost confidence in borrowing.
Dealers and educational advertising communicating the benefits of these products are expected to
play important roles in steering the purchase decisions of customers.
This Frost & Sullivan research service analyses the eastern European automotive point-of-sale
(POS) finance market in the following countries: Poland, Hungary, the Czech Republic, the Slovak
Republic, Slovenia, Romania, Latvia, Lithuania and Estonia. The study provides valuable insights for
companies looking to enter this market. It also encapsulates detailed strategic recommendations on
market entry, products, product positioning, promotions and a comprehensive analysis of growth
strategies adopted by leading market participants.
Joint Ventures, Partnerships and Wholly-owned Subsidiaries Set To Increase in Market
Competition in the eastern European automotive POS finance market is expected to intensify
following extensive marketing efforts by finance companies including creative promotions, flexible
financing and value-added products. While opportunities in this market are plentiful for new
entrants, both foreign captives and independent finance companies need to understand the local
market dynamics before increasing investments or starting subsidiary operations.
"Joint ventures (JV) and partnerships are anticipated to be suitable entry modes for foreign
captives and independents in the short run, while in the long run, foreign entrants can either
acquire or set up wholly-owned subsidiaries in eastern Europe," says the analyst of this
research service. This will help them in expanding presence while ushering in new products and
services to the market and realising critical economies of scale.
Buoyant Growth Projected for Eastern European Automotive Finance Market
"Despite the slump in vehicle sales and changes in the legislative and economic landscape in
2004, Frost & Sullivan anticipates buoyant growth in the eastern European POS finance market
through the decade," says the analyst. "Total POS loans are expected to reach 1.6 million
cases and total finance volume is anticipated to exceed 10.3 billion euros by 2011."
While independent finance companies currently dominate the market for both new and used cars, new
captive entrants are gearing up to invest heavily in car promotions and are combining value-added
services with finance products. This is likely to result in increased penetration and market share
for captive companies. However, independent companies are expected to continue as aggressive
competitors to captives mainly due to consolidations and good dealer relations in Eastern Europe.
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