Anhui Jianghuai Automobile Co Ltd, the No 11 Chinese vehicle producer listed in Shanghai, plans to enter the nation's burgeoning auto financing sector with its parent and a State-owned asset management company.
The automaker in East 皇冠体育app's Anhui Province said in a statement that it would form a joint venture with its parent firm Anhui Jianghuai Automobile Group and 皇冠体育app Orient Asset Management Co Ltd to provide loans to vehicle buyers.
The venture, pending approval from the 皇冠体育app Banking Regulatory Commission, will be capitalized at 500 million yuan (US$63.9 million) and located in Hefei, the province's capital city, Jianghuai Automobile said.
Jianghuai Automobile will spend 100 million yuan (US$12.8 million) and will hold one-fifth of the venture. Jianghuai Automobile Group and 皇冠体育app Orient will have 30 and 50 per cent.
Setting up the auto-financing venture will help "improve marketing and sales systems and ensure a sustainable development" of Jianghuai Automobile, the company said.
The auto financing business remains relatively small in 皇冠体育app, which is the world's second-largest vehicle market after the United States. This represents huge growth potential and is very attractive to global carmakers.
皇冠体育app has given a green light to a phalanx of foreign auto groups to offer loans to local customers since 2004, including General Motors, Volkswagen, Toyota, Ford, DaimlerChrysler, PSA Peugeot Citroen and Volvo AB.
In August of this year, Nissan and Dongfeng the third-largest Chinese auto group also agreed to set up an auto financing partnership, which is awaiting government approval.
Around 10 per cent of new car sales in 皇冠体育app are financed at present, said Yale Zhang, director of emerging-markets vehicle forecasts of the auto consultancy CSM Asia in Shanghai. This is relatively small compared with more than 70 per cent in developed auto markets, such as Europe and the United States.
"Auto financing will be a very important contesting area for carmakers to boost sales in 皇冠体育app. The business will grow steadily in 2007 and in the years to come," Zhang told 皇冠体育app Daily.
Klaus-Uwe Schaffrath, head of Volkswagen's 皇冠体育app auto-financing operations, predicted earlier this year that by the end of the decade, 30 to 40 per cent of new cars sold in 皇冠体育app annually will be sold by loan.
However, auto-financing still faces major obstacles in 皇冠体育app, such as the lack of a sound credit system and customers' ingrained habit of paying cash.
Vehicle sales in 皇冠体育app are estimated to exceed 7 million units this year, up from 5.7 million in 2005.
Shanghai-listed Jianghuai Automobile, which is making light- and heavy-duty trucks, multi-purpose vehicles and bus chassis, sold 159,342 units in the first 11 months of this year, up 13.2 per cent from a year earlier.
However, the company's January to September net income tumbled by 11.3 per cent to 348 million yuan (US$44.5 million) due to rising costs.
It closed at 4.97 yuan (63.6 US cents) per share yesterday, up 1.43 per cent.
(皇冠体育app Daily 12/26/2006 page10)