HO CHI MINH CITY (BLOOMBERG) - In Vietnam, where motorbikes outnumber cars by a factor of 16, Uber Technologies is helping to create a new generation of auto drivers with first-time bank loans for vehicle purchases.
Vu Ngoc Hung traded his 12-year-old Taiwanese scooter for a brand-new US$28,500 (S$38,266) Honda City after a lender financed 80 per cent of his white four-door sedan based on his Uber fares.
The program with Viet Capital Bank enabled him to more than triple his income to US$850 a month through the app-based taxi service to support his wife and parents, who previously sold stationery from home to help make ends meet.
"Driving a taxi through Uber has transformed my family's life with a stable income," said Hung, 40, who previously worked as a driver for a company. "I am now my own boss at a time when it's not easy to land a good-paying job."
Uber's three-month-old bank programme is changing the Vietnam Dream, which now includes a new automobile in a nation of 45 million motorbikes.
After testing in a country where Toyota Vios sedans compete with scooters carrying a family of four down narrow avenues hazy from vehicle pollution, the initiative is being rolled out in other Southeast Asian markets.
"About 70 per cent of car buyers borrowed money from banks last year," said Ho Minh Tam, vice chief executive officer of Viet Capital Bank. "Vietnamese spending behaviors have changed."
The programme also opens up another front for Uber in its battle for ride-hailing customers and drivers. In Vietnam, the San Francisco-based startup competes with GrabTaxi Holdings like it battles Lyft in the United States and Didi Chuxing in China.
Hung is one of the first Uber drivers in Vietnam to use the programme that could be tapped into by tens of thousands of other Vietnamese, said Dang Viet Dung, Uber Vietnam general manager.
For many people in the country, it's the first time they have relied on financing in one of Southeast Asia's most expensive automobile markets.
"We believe this type of program has the potential to deliver similar benefits in other countries in the region and the world," Dung said.
Uber has also just started a leasing program with Toyota Motor Corp in which payments are made from Uber fares.
Hung says his car payments are deducted from his fares, which amounts to about half his monthly income and makes his take-home pay about US$450 a month. His e8 per cent interest rate is lower than the 10-12 per cent rates offered to Vietnamese who are able to afford a down payment of as much as 40 per cent, Hung said.
However, he would be on the hook for 4 per cent of the remaining loan should he pay it off early.
Grab, though, is not participating in vehicle financing programs and urges its "partners" not to "buy new cars to drive Grab as that would increase the numbers of vehicles on the roads, worsening the traffic situation and going against our company's policy and goal," Nguyen Tuan Anh, Grab Vietnam director, said in an e-mail.