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Volkswagen to expand car loans business

By Gong Zhengzheng (China Daily)
Updated: 2006-08-11 08:57

Schaffrath predicted that 30 to 40 per cent of new car sales in China per year would be financed by 2010, up from less than 10 per cent at present.

The auto-financing business remains small in China mainly because the country lacks a sound credit system and most local customers are unused to paying for cars in instalments.

Commercial banks in China began tightening controls on auto credit and some even halted the business in 2004 to prevent bad loans from bloating.

In contrast, more than 70 per cent of new cars are sold through loans in developed auto markets such as Europe and the United States.

"We expect China's central bank will set up a sound credit system soon and we will be able to access it," Schaffrath said.

Volkswagen Group China said earlier that the carmaker's 2006 sales would rebound from consecutive tumbles over the past two years.

In the first half of this year the group's China sales surged by 30.2 per cent to 345,375 cars.

Volkswagen runs two car ventures with First Automotive Works (FAW) and the SAIC.

The venture with FAW makes the Jetta, Bora, Sagitar, Golf and Caddy as well as the Audi A6 and A4. The venture with the SAIC builds the Santana, Polo, Passat, Gol and Touran.

Sales of all made-in-China vehicles grew by almost one-fourth to 4 million units from January to July this year, including 2.1 million cars, according to industry data. Full-year vehicle sales are forecast to reach 7 million units.