China's auto finance industry defies sluggish car sales

In contrast to sluggish car sales in China in 2015, auto financing companies saw robust growth. SAIC-GMAC, China's first official auto financing company, reported a 31% YoY growth in 2015 with 570,000 new retail contracts and ¥68bn ($10.4bn) of outstanding loans. The growth was mainly due to a higher auto financing penetration rate; the percentage of consumers buying cars through loans, which rose from 5% to around 25% over a few years, and senior industry professionals expect to reach 50% by 2020. Chen Guiqiong, VP of Ford's China auto financing arm said, "the industry still has huge potential if you consider the 80% penetration rate in more mature markets in the US or Europe". Analysts say the industry may be worth ¥2tn by 2020. 

China's auto financing industry accelerates

Borrow to buy a car? It's hardly a thought for most Chinese ten years ago, but the increasingly common option is now fueling an emerging auto financing industry.



Auto financing companies, which offer car loans to individual consumers and car dealers, saw robust growth last year despite sluggish car sales.



SAIC-GMAC, China's first official auto financing firm, registered a 31-percent year-on-year growth in 2015 with 570,000 new retail contracts and 68 billion yuan (10.41 billion US dollars) of outstanding loans.



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



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," said Chen Guiqiong, vice president of Ford's auto financing arm in China.



Analysts have predicted that auto financing in China will be worth around 2 trillion yuan by 2020.



Unlike traditional bank loans, professional auto financing firms usually offer a lower down payment rate and request little collateral, which make it the perfect option for many.



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



The increasing popularity of auto financing may become a silver lining for the country's slowing auto industry.



In 2015, auto sales in China accelerated at the slowest pace in three years.



Ford predicted that around 23.5 million to 25.5 million automobiles will be sold in China in 2016.

