Financial China

Will auto finance stumble again?

  • Published 22 Apr 2010

A confluence of factors suggest that this year will be a bumper one for auto finance as the industry leaves behind memories of its rupture in 2004.

Back in 2003, everything seemed set fair for the auto finance industry. Accumulated auto loans accounted for 22.4% of total auto sales in renminbi value (see chart 2) and the industry was looking forward to a day when this ratio would head towards the 60% mark common in developed countries at that time. A future propelled by credit multipliers was just over the horizon. But then everything changed. Defaults proliferated; some unscrupulous customers even bought cars on credit and then just drove them away to distant cities beyond the reach of loan officers. By 2007, the industry had regressed so much that accumulated auto loans accounted for only 5.4% of total auto sales.

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