Overview of Taiwan’s Leasing Industry



AFSA Country Report

TAIWAN

1. Taiwan’s Economic Review

1. Major Economic Indicators in 2011

|Year 2011 |Unit |Change % |

|Economic Growth Rate |4.03 |% |-6.69% |

|GDP |4,665 |100 Million US$ |8.46% |

|Per Capita GDP |20,139 |US$ |8.34% |

|GNP |4,797 |100 Million US$ |8.11% |

|Per Capita GNP |20,713 |US$ |8.02% |

|Consumer Price Index |1.42 |% |0.46% |

|Investment Ratio |20.6 |% |-1.5% |

|(Gross domestic investment as the percent of GNP) | | | |

|Total Exports on Customs Basis |3,082 |100 Million US$ |12.02% |

|Total Import on Customs Basis |2,814 |100 Million US$ |12.24% |

|Unemployment Rate |4.39 |% |-0.82% |

Source: Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.(Taiwan)

2. Economic Performance in 2011

In the first half of 2011, Taiwan’s economy maintained a stable recovery, but in the second half of the year, the sovereign debt crisis in the Eurozone and deleveraging in the developed economies exerted an adverse impact on Taiwan’s external trade. For the year as a whole, exports and imports increased by 12.3% and 12.1% respectively. The unemployment rate averaged 4.39%, and the consumer price index (CPI) increased 1.42%. On the financial side, the monetary aggregate, M2, grew by 5.79%, while the average stock price index stood at 8,155points. According to the latest estimation, GDP grew4.03% in 2011, 0.48 of a percentage point below the previous projection by the DGBAS*. In December, the overall monitoring indicator flashed the "blue" signal for the second consecutive month, indicating the economy has entered a phase characterized by significant downside risks and fragility.

In order to ease the impact on Taiwan of weak economic conditions in Europe and the US, the government has formulated a comprehensive stimulus package which features seven strategies, including maintaining financial market order, stabilizing prices, creating job opportunities, promoting investment, assisting small and medium-sized enterprises, and boosting domestic consumption.

* DGBAS：Directorate-General of Budget, Accounting and Statistics

Source: Council for Economic Planning and Development Executive Yuan

2. Taiwan’s Leasing Industry

2.1 Market Growth

Taiwan’s leasing industry recovered with a growth rate of 13% in 2007 and remained steadily in 2008. Nevertheless, due to the global financial turmoil in 2009, Taiwan’s leasing market didn’t make progress and decreased 8.1% by comparing to 2008. In 2010, owing to the strong growth of the world economy, the business recovered quickly and had a growth rate of 37.7%. The leasing business continued growing in 2011. The total contract amount of leasing and installment reached NT$197,286 million, which was the highest record in the past decade.

Table 1：Year 2007~2011 Contract Amount of Leasing & Installment

Unit: NTD Thousand

|Business |2007 |2008 |2009 |2010 |2011 |

|Leasing | 30,797,799 | 38,510,348 | 22,055,073 | 36,521,364 | 38,334,559 |

|Installment | 99,022,031 | 91,091,242 | 97,111,953 |127,567,171 |158,951,530 |

|Total |129,819,830 |129,601,590 |119,167,026 |164,088,535 |197,286,089 |

|Change % |13.0% |-0.2% |-8.1% |37.7% |20.2% |

Source: The Taipei Leasing Association, R. O. C.

2.2 Market Penetration

As you can see from the following table, the domestic investment gross amount and the leasing contract amount both grew obviously in 2010 after the global financial crisis in 2009. In 2011, the leasing contract amount kept increasing, but the domestic investment gross amount diminished a little. The ratio of the leasing amount expressed 6.79% of total domestic investment gross amount, which was enlarged by comparing to 2010.

Table 2：Year 2007~2011 Market Penetration of Leasing

Unit: NTD Million

|Item |2007 |2008 |2009 |2010 |2011 |

|Contract Amount of Leasing |129,820 |129,602 |119,167 |164,088 |197,286 |

|Domestic Investment Gross Amt. |2,855,809 |2,826,311 |2,208,399 |3,104,590 |2,905,240 |

|Penetration % |4.55% |4.59% |5.40% |5.29% |6.79% |

Source: The Taipei Leasing Association, R. O. C.

Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.

2.3 Major Market Players

There were a total of twenty-one members, which include six new comers, registered with The Taipei Leasing Association in 2011. Those members were the major market players in the Taiwan leasing market as well. The members could be divided into four different categories, which were banking affiliates, independent leasing companies, captives and foreign financial companies as shown in the following table 3. As you can see, the group of bank affiliates was the majority with eight members.

Table 3：Categories of members of The Taipei Leasing Association in 2011

|Category |No. of Member |% |

|Bank Affiliate |8 |38% |

|Independent Leasing Company |7 |34% |

|Captive |3 |14% |

|Foreign Financial Company |3 |14% |

|Total |21 |100% |

Source: The Taipei Leasing Association, R. O. C.

Nevertheless, with regard to the market share, the biggest group, bank affiliates did not represent the majority of the total market size. The group of independent leasing companies was the leader with more than 50% of market shares.

Among those market players, the market leader in Taiwan’s leasing industry was Chailease Finance Co. Ltd., which has established for more than 35 years and also been the market leaders for a long period of time. Its market share reached 43% in 2011.

2.4 Business Brief

■ Business Types

Business types of leasing industry in Taiwan could be defined as two categories, which were the leasing business and the installment. In general, the business ratio of installment was much more than that of leasing business. The installment took about 75~80% of total business and leasing business took only about 20~25% of all.

Figure 1：Five-year Change of Contract Amount of Leasing & Installment

Unit: NTD Thousand

[pic]

Table 4：Year 2007~2011 Percentage of Business Type

|Business Type |2007 |2008 |2009 |2010 |2011 |

|Leasing (%) |24% |30% |19% |22% |19% |

|Installment (%) |76% |70% |81% |78% |81% |

|Total |100% |100% |100% |100% |100% |

Source: The Taipei Leasing Association, R. O. C.

Table 5：Year 2009~2011 Contract Amount of Leasing & Installment by Property

Unit: NTD Thousand

|Type of Property |2009 |2010 |2011 |

| |Leasing |Installment |Leasing |

Source: The Taipei Leasing Association, R. O. C.

Table 6：Year 2009~2011 Percentage of Contract Amount of Leasing & Installment by Property

Unit:%

|Type of Property |2009 |2010 |2011 |

| |Leasing |Installment |Leasing |

Source: The Taipei Leasing Association, R. O. C.

■ Types of Property

Raw material used to be the biggest portion; however, it dropped to the second since 2008. As you can see in table 7 and 8, the predominant properties in leasing industry were vehicle & transportation, raw materials, and manufacture from 2009 to 2011. In 2011, these three types of properties accounted for 84% of total transactions and generated about 166 billion contract amounts.

Table 7：Year 2009-2011 Contract Amount by Property

Unit: NTD thousand

|Type of Property |2009 |2010 |2011 |Change % |

|Manufacture |11,368,429 | 13,223,305 | 12,426,390 |-6% |

|OA |3,300,685 | 4,576,253 | 4,982,158 |9% |

|Vehicle & Transportation |55,541,558 | 83,461,877 | 101,020,801 |21% |

|Construction |3,763,724 | 9,389,740 | 10,019,279 |7% |

|Medical |1,299,256 | 1,312,601 | 1,297,834 |-1% |

|Raw Materials |32,800,996 | 45,600,529 | 53,448,485 |17% |

|Others |11,092,378 | 6,524,230 | 14,091,140 |116% |

|Total |119,167,026 | 164,088,535 | 197,286,089 |20% |

Source: The Taipei Leasing Association, R. O. C.

Table 8：Year 2009~2011 Percentage of Contract Amount by Property

Unit: %

|Type of Property |2009 |2010 |2011 |Change % |

|Manufacture |10% |8% |6% |-2% |

|OA |3% |3% |3% |0% |

|Vehicle & Transportation |47% |51% |51% |0% |

|Construction |3% |6% |5% |-1% |

|Medical |1% |1% |1% |0% |

|Raw Materials |28% |28% |27% |-1% |

|Others |9% |4% |7% |3% |

|Total |100% |100% |100% |- |

Source: The Taipei Leasing Association, R. O. C.

■ Terms of Contract

From the table below, it is shown that more than 60% of contract terms were between 24 months and 36 months. Terms equal or above 48 months only accounted for about 11~13% from 2009 to 2011. The term of 36 months accounted for the largest proportion and the term of 24 months was the second in 2011. The result was different from that of 2010.

Table 9：Year 2009~2011 Percentage of Contract Amount by Contract Term

Unit: %

|Term |2009 |2010 |2011 |Change % |

|Below 12 months |15.32% |18.14% |14.32% |-3.82% |

|18 months |7.45% |5.79% |5.39% |-0.40% |

|24 months |21.55% |34.11% |17.43% |-16.68% |

|36 months |42.31% |31.60% |51.58% |19.98% |

|48 months |5.40% |5.51% |7.03% |1.52% |

|60 months |4.19% |4.71% |3.75% |-0.96% |

|Above 60 months |3.77% |0.15% |0.49% |0.34% |

Source: The Taipei Leasing Association, R. O. C.

■ Major Target – SMEs*

Owing to the credit policies of bank institutions, it was extremely difficult for SMEs to obtain financial resources from commercial banks. Therefore, SMEs turned to leasing companies to acquire sources of financing. Hence, leasing companies have increasingly developed close business ties with SMEs. Over a long period of time, SMEs became the major target for Taiwan’s leasing industry, particularly for independent leasing companies. For SMEs, leasing companies not only could provide flexible finance solutions, but also offer efficient services to them. The contract amount from SMEs accounted for more than 90% of total contract amounts in 2011.

Table 10：Percentage of SMEs by Contract Amount

Unit: NTD Thousand

|Year |2009 |2010 |2011 |

|Contract Amount from SMEs |105,130,192 |144,658,548 |179,142,446 |

|Total Contract Amount |119,167,026 | 164,088,535 | 197,286,089 |

|% of SMEs |88% |88% |91% |

Source: The Taipei Leasing Association, R. O. C.

* SMEs here represent the enterprises with capital below 100 million NTD (approximately 3 million USD).

3. Prospects for Taiwan’s Leasing Industry

Taiwan’s leasing industry has been developing for more than 40 years. The leasing market already becomes very mature and saturated. However, the Legislation of Finance Company Act has been pending for many years. In order to expand business scopes, many Taiwan’s leasing companies already launch and develop their business in mainland China instead of remaining in Taiwan in recent years.

In spite of the opportunities in mainland China, Taiwan’s leasing companies still continue developing new leasing business; for example, ESCO* finance, in order to grow in such competitive market. Owing to the government’s promotion, more and more enterprises start to care about the issue of green ecology and realize the importance of saving energy. Therefore, some leasing companies, such as Chailease Finance Co. Ltd., already explore the business opportunity from this wave and develop the new business model of ESCO finance. In sum, ESCO finance is leasing companies provide financial resources to ESCO to install power saving devices for energy saving. According to the statistics of TESA*, there are more than US$2 billion sales amount of ESCO business each year in Taiwan. It will definitely create huge business opportunities to Taiwan leasing industry.

* TESA：Taiwan Energy Service Association

* ESCO：Energy Services Company

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