Shanghai Automotive Industry Corporation (SAIC) is planning to expand its car financing business as a way to stimulate consumption and boost profitability, its chairman says.

Speaking to the South China Morning Post, Hu Maoyuan said: “We’re developing more car financing services because that can attract consumers.”

Mr Hu did not provide details of how SAIC would develop its car financing arm but said: “The credit business itself has value because consumers will find it more convenient to purchase with credit instead of cash.”

SAIC reported that third-quarter earnings plunged 78 per cent to 260.8 million yuan on slowing demand for vehicles.

GMAC-SAIC Automotive Finance, the financing arm of General Motors China and SAIC, was the first entity to get government approval for a securities product backed by car loans, in November last year.

According to Fitch Ratings, only about 1 million people on the mainland, or 20% of buyers, took out loans to pay for cars last year, compared with rates of 50% in Japan and 90% in the US.

“The credit business is one of the ways to stimulate economic growth with leverage,” Mr Hu said.

The report noted that the fact that the car financing market in China was relatively underdeveloped may have saved the mainland’s car industry during the current credit crunch.