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The financial arm of General Motors (GM) announced yesterday that its joint venture with a Chinese partner had obtained the final nod from the China Banking Regulatory Commission (CBRC) to start operations.
The joint venture will have a registered capital of 500 million yuan (US$60.4 million), in which General Motors Acceptance Corp (GMAC) and the financial unit of Shanghai Automotive Industry Corp (SAIC) will control a 60 and 40 per cent stake respectively.
The joint venture, or GMAC-SAIC Auto Finance Co Ltd, will be located in Shanghai, China's financial center.
GMAC-SAIC Auto Finance is expected to kick off business "shortly" and it will initially offer wholesale and retail financing for vehicles manufactured by GM's joint ventures with SAIC in China, GMAC said in a statement.
"Our new joint venture will contribute to the maturation of China's vehicle market while making GM products available to a greater number of consumers," said Richard Clout, president of GMAC International Operations.
GM and SAIC run four joint venture plants in eastern, northeastern and southern China, producing Buick sedans and Chevrolet and a local brand mini vehicles.
Earlier this week, Ford Motor's financial arm Ford Credit announced that its application to form a wholly-owned auto financing branch in China had been approved by CBRC.
Ford Credit's expected US$60-million branch will provide loans to Chinese vehicle buyers in the middle of 2005.
The financial units of Germany's Volkswagen and Japan's Toyota gained CBRC's green light to prepare wholly-owned auto financing operations in China at the end of last year. But the two companies have not revealed details about their anticipated auto financing branches in China.
Analysts say that auto financing has tremendous potential in China but faces problems mainly because of the lack of a sound credit system in the nation. Many commercial banks in China have enhanced the threshold for auto financing and even halted the business this year because of concerns about bad loans.
At present, less than 10 per cent of total new car sales in China use loans, down from 30 per cent a year earlier. Over 70 per cent of automobile sales are financed in developed markets.
"We expect the situation (in China) to change quickly, with automotive financing in China growing 60 to 80 per cent in coming years," Clout said.
Since its inception in 1919, GMAC has extended more than US$1 trillion in credit to help finance more than 150 million vehicles worldwide.
SAIC's financial unit, or Shanghai Automotive Finance Co Ltd, has a registered capital of 1 billion yuan (US$120 million) and total assets of 22 billion yuan (US$2.7 billion).
GM is the second biggest foreign automaker in China behind Volkswagen. It sold more than 259,000 vehicles in China during the first half of this year, jumping 57.6 per cent from the corresponding period of last year.
(China Daily August 6, 2004)
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