As China’s car market no longer delivers the obscene growth rates it used to deliver (pretty hard when you compare with prior-year months where car sales jumped nearly 100 percent), carmakers are looking for clever ideas to light a fire under their Chinese sales. They all come up with the same solution: Attractive loans.
But nobody wants them.
An attractive loan, China style, is laid out by Gasgoo: You buy a Honda City for some $16,000. A 30 percent cash down payment is required, and all taxes have to be paid. $6,800 cash on the barrel-head. The remainder is to be settled in 18 monthly payments of $590. For a Honda City.
No wonder that only 8 percent of the Chinese are buying a car on credit. That number is actually trending down. It’s not just that the terms are less than fascinating. Buying anything else than a house on credit just isn’t the Chinese way. You either have the cash, or you have a bicycle.
China’s carmakers look longingly westward, where captive financing arms bring 30 to 50 percent of the profits to their mothership’s bottom line. Not in China. Which doesn’t stop them from trying. Chery started the Chery-HuiShang Bank Auto Financing Co. Other manufacturers are doing the same.
“From 2000 to 2009, the automobile industry has maintained a high speed of growth. However, only 8 percent of consumers choose to buy their cars by loan,” said Xu Xiaohua, General Manager of CITIC Bank Headquarters’ Auto Finance Center. “The car loan market definitely has an attractive prospect of development.”
Or none at all.