To rev up sluggish iPhone sales, Apple is offering interest-free iPhone financing in China.
Apple (AAPL) - Get Apple Inc. (AAPL) Report is teaming up with a number of local banks as well as Ant Financial, an Alibaba (BABA) - Get Alibaba Group Holding Ltd. Sponsored ADR Report affiliate, to offer the deal to Chinese consumers, Reuters reported. According to a Chinese version of Apple's website, the financing arrangement allows buyers to make interest-free payments over the course of three, six, nine, 12 or 24 months.
Customers must spend a minimum of 4,000 ($598) yuan to qualify for the interest-free financing, with the entry-level iPhone XR starting at 6,499 yuan in China. Buyers who trade in older iPhone models can also pay cheaper installments.
Back in January, Apple CEO Tim Cook warned investors that Apple would fall substantially short of fourth-quarter revenue targets owing in large part to disappointing sales in China. The episode revealed just how important of a sales market China is to Apple -- and perhaps raised a sense of urgency in getting more iPhones to Chinese consumers.
Apple's China revenue was $13 billion for the fourth quarter, representing a year-over-year decrease of 27%.
"They had their backs against the wall in China, and they have to do whatever they need to do to incentivize consumers to upgrade," said Wedbush's Dan Ives. "China is the heart and lungs of the Apple growth story in the next few years. There's a window of opportunity when they need to get upgrades, and if they don't, it'll be dark days."
As iPhone unit sales have softened, Apple has shown an openness to discounts or other promotional tactics to get new iPhones into more hands. In December 2018 for example, Apple offered a military discount over the holiday shopping period, and also offered a Chinese New Year sale in select Asian countries.
The interest-free financing could be one of many tactics that Apple tries, as it strives to expand its footprint with Chinese consumers.
"This is the first example, and we expect to see more, of out-of-the box financing or other pricing schematics in China on the horizon," Ives added.