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The semiconductor crisis that besieges the automobile sector is going to claim a new victim in the financial sector. Banks are already noticing the impact of the shortage of microchips in the sale of new vehicles and, therefore, in their financing, one of the most profitable for entities. A downturn that, as warned from the sector, goes for long.
This same week it was known that new vehicle registrations have fallen by 20.5% in October, the worst record since 2011 and the third most negative data in the last thirty years, according to information provided by manufacturers associations (Anfac), dealers (Faconauto) and sellers (Ganvam).
Undoubtedly, a black October for a sector that had already suffered a halt in activity due to the restrictions of the pandemic and that was still not managing to join the economic recovery train, in which other sectors are advancing. And this collapse, caused by the shortage of microchips, has an automatic transfer to the sector from financing to the purchase of new production vehicles.
“It is being noticed and quite a lot”, confirms to EL ESPAÑOL-Invertia a manager of the financial sector, who explains that in the case of his entity financing for the purchase of vehicles has fallen by as much as 10% in October alone compared to a year earlier – taking into account that in the summer of 2020 there was a strong increase in the request for financing due to the advance of consumption -, which represents the first sharp drop in years on this type of loan, excluding the impact of the pandemic.
A crash that, at least for the moment, is limiting itself to financing for the purchase of vehicles and it is not being extended to other products potentially affected by the shortage of semiconductors -such as electronics-, in which for the moment the demand for double-digit credit continues to grow in some entities. A contrast to say the least.
Long term
This downturn is here to stay, as this same source laments, emphasizing that this crisis, which is automatically transferred to the financial sector, is not going to be short-term. Not surprisingly, car factories announce new shifts and plant closings day yes, no day, and, “if there are no cars, there is no financing”.
At the moment, it is anticipated that it could last until mid-2022, although there is a lot of uncertainty in this regard and also for banks, which can hardly remedy the situation, as the origin is beyond their control.
A wafer of microchips.
TSMC
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This source also explains that the fall has been taking place slowly, but in October it has become much clearer. That is why the balance sheets of the banks for the third quarter, known a few days ago, do not show a great impact for this effect at the moment. Nevertheless, Santander recognizes in its accounts that loans to clients of its finance company fell 1% in the third quarter compared to the second due to lower productions in the Auto segment.
“Activity in the third quarter has been impacted by global production problems in the new car market, while volumes have remained stable in used vehicles, “the bank points out in its quarterly report. In the case of other entities, there are falls in non-mortgage financing to individuals, but in no case is it linked to the shortage of semiconductors.
a inside for banking
The impact of this crisis makes it a inside to banks, which has one of its most profitable businesses in financing the purchase of vehicles. “It represents a very relevant part of the banking business and reports high interest rate income compared to mortgage rates, around four times higher, since the [crédito] mortgage accounts for 2% compared to 8% for automobiles “, he explains to EL ESPAÑOL-Invertia Carlos Cuatrecasas, partner of FS Consulting Strategy of KPMG in Spain.
In his opinion, “the lack of components in the manufacturers affects not only the automaker, but also to financial entities such as insurers, since they will not earn new insurance premiums for new vehicles, reducing its business to maintaining the portfolio already achieved. As the situation progresses, the impact will be greater and greater both in financial institutions and in insurance companies. “
Regarding this last aspect, when asked about the question, a few days ago he explained Fernando Mata, CFO of Mapfre, that the insurer has not been affected for the moment by the semiconductor shortage, since its Auto premiums grow compared to the rest of the sector.
If this crisis continues, so will its impact on financing the purchase of new vehicles – with the possibility that it will end up reaching insurance – something that would only put more sticks in the wheels for a banking sector that already faces too many problems in 2022: a lot of uncertainty about the evolution of defaults, especially those of ICO credits, and a Euribor that, although on the rise, will continue to be negative throughout the year. Yet another challenge.
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