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China's Auto Financing Industry Grows Despite Sluggish Sales

| Feb 12, 2016 08:50 PM EST

Prospective buyers look at cars displayed at a dealership in China, where auto financing firms have reported growth last year despite sluggish sales.

Auto financing companies in China that offer car loans to individual consumers and car dealers saw robust growth last year despite slow car sales, the Xinhua News Agency reported.

The report cited the 31-percent year-on-year growth of SAIC-GMAC, China's first official auto financing firm, in 2015, registering 570,000 new retail contracts and 68 billion yuan ($10.41 billion) of outstanding loans.

Yu Yarui, general manager of SAIC-GMAC, attributed the growth mainly to a higher auto financing penetration rate, which measures the percentage of consumers that buy cars through loans.

The report said that the penetration rate has risen to around 25 percent from only 5 percent a few years ago.

"The auto financing industry in China still has huge potential if you consider the 80-percent penetration rate in more mature markets in the United States or Europe," Chen Guiqiong, vice president of Ford's auto financing arm in China, said.

By 2020, auto financing in China will be worth around 2 trillion yuan, analysts have predicted.

According to the report, many consumers take the option from professional auto financing firms, which usually offer a lower downpayment rate and require little collateral, unlike traditional bank loans.

Financing companies also provide customized financial products for specific groups such as university students and farmers.

For the country's slowing auto industry, the increasing popularity of auto financing could be its hope.

Auto sales in China accelerated in 2015, though at the slowest pace in three years, the report said

Around 23.5 million to 25.5 million automobiles are expected to be sold in China in 2016, Ford predicted.

A statement released by China Association of Automobile Manufacturers (CAAM) released on Jan. 20 said that passenger cars exceeded 20 million for the first time.

The statement added that the production and sales of passenger cars in 2015 reached 21,079,400 and 21,146,300 units respectively, up 5.8 percent and 7.3 percent year-on-year, 2.5 percentage points and 2.6 percentage points higher than the overall growth of automobiles.

But by type, SUV continued a high-speed growth for the whole year, as the production and sales were up 49.7 percent and 52.4 percent, respectively, CAAM said.

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