Electric car maker BYD Co has formed a 500 million yuan (US$73 million) auto financing venture with France's CGL.

Shenzhen-based BYD, which is backed by Warren Buffett, will contribute 400 million yuan to BYD Auto Finance Co while CGL will invest the remainder, according to BYD's statement to the Hong Kong stock exchange yesterday.

BYD said the venture, which is still subject to government approval, will provide auto loans to both dealers and individuals on the Chinese mainland.

BYD's move into auto financing reflected its intention to lift sales after competition increased in the world's largest auto market.

However, the move will have limited impact in boosting BYD's sales and profits this year and next, according to Morgan Stanley.

CGL is a subsidiary of Societe Generale, one of Europe's largest financial services companies.

Car makers including GM, Ford, Toyota and Nissan have set up auto financing businesses here to boost sales.

Among China's home-grown car makers, Chery Automobile Co Ltd teamed with Huishang Bank to set up an auto financing company in 2008.

Although Chinese once purchased cars in cash, car loans are more in demand after concerns about bad debts eroded at auto financing units and banks.

In April, banks in Shanghai extended 1.2 billion yuan in auto loans, double the rate of a year earlier.

BYD has reported a 78 percent sales increase for the first five months of this year after May sales rose 38 percent to 45,020 units. The company plans to double sales to 800,000 units this year.

The car maker is expected to launch four models including the G3 sedan in the second half of this year.

Shares of BYD lost 1.34 percent to HK$62.35 (US$8.01) yesterday.