Shanghai-based Chenengdai, an internet P2P automobile loan platform, has been issued a license from the Shanghai government, according to company website, allowing it to extend further into the lending industry. The company allows users to upload their car details to a platform where independent borrowers can then chose to ‘mortgage’ the car, while Chenengdai takes a 5% cut.
The announcement follows Didi Kuaidi’s announcement that it has snagged the first license to run ‘legal’ private cars in Shanghai. U.S. rival Uber announced the official registration of their China subsidiary in Shanghai’s Free Trade zone in the same week, hoping to get the same license soon.
In 2004, automobile loans in China surged to 85 billion RMB ($1 billion USD) as Chinese people embraced mortgage loans. When the economy began to slow, the Chinese government lowered the service charges for automobile mortgage registration in 2013 to revive the economy. With more than 70 million private cars registered in China, the automobile mortgage loan market is reviving.
Unlike the traditional concept of borrowing money to buy a car, automobile mortgage loans means that the loan is secured on the borrower’s automobile.
Using the platform, a borrower can ask for a loan and put their car under professional assessment of the company, putting it up as collateral. Every car goes through strict screening before being uploaded to the platform, then the borrower can apply for mortgage registration and sign a loan contract. When the borrower’s information and vehicle information are online, lenders can choose to lend money based on the borrower’s car profile.
“Now about 20,000 people are on the lender side in Chenengdai, but there are not enough borrowers, which is a problem,” Chenengdai founder and CEO Gan Jianjun says. “However, the car mortgage loan in China does not have a long history and market is starting to grow now, which is a big opportunity for us.”
But why are cars popular for mortgage loans? According to Gan, users feel less pressure and feel safer because it’s small loan amount for short term, about one to three months. “On average, the loan amount is 60,000 RMB ($9,400 USD) and the cumulative lending amount through our platform reached 75,000,000 RMB ($11.8 million USD) so far. The debt rate is zero,” Gan said.
Founded on November 2014, the 10-month old company has 23,000 users and offices in five locations, including Ningbo, Shanghai and Zhejang with 110 employees in total, according to the company. They received 12 million RMB ($1.8 million USD) angel investment in May and say they are close to sealing an A series round. In July, the company joined Feimalv, an accelerator based in Shanghai, where they received help on its platform.
“Being in Shanghai has a lot of merits. Finance technology is very advanced in Shanghai and there are many talents in the city. The mortgage loan market is huge too,” Gan noted.
The company takes about 5% commission from the transaction, in the name of mortgage registration cost, platform service charge, opening fee GPS monitoring fee, and other expenses. According to Gan, the company’s profit is about 1,000,000 RMB ($157,000 USD) per month.
Chenengdai is Gan’s third startup. After working for the government for 15 years he started in tech media in 2009, followed by a real estate planning and sales. “It had healthy prospects then, but now it is not that good sector to focus on,” he laughed. Seeing how China’s real estate market slowed down through the years, Gan believes car mortgage loans are a better prospect now.
“The efficiency of car mortgage loans is very high,” Gan adds. “Due to the small loan amount, the quick daily loan is possible and users are mostly satisfied with our service and become frequent users of our platform.”
There are many competitors in the market, including sized companies like Weidai and Touna in the similar category. However Gan believes the current fund amount for internet-based companies is substantial, and there is much more demand from users than the supply (platforms) in the market.