Volkswagen reportedly expects to start offering car loans to customers in China in four to eight weeks after joining rival General Motors in winning approval to operate a domestic auto financing arm.

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Reuters noted that Europe’s biggest auto maker is going it alone in offering car loans in China, unlike GM, which has established a joint venture.


Volkswagen now awaits the granting of a formal business licence, it reportedly said in a statement on Friday, as it gears up to enter the largely untapped market.


Reuters said foreign players hope car financing will spur the next stage of market growth, even though China has no central credit rating agency, no laws to repossess cars from errant borrowers, and – after a few years – a swelling pool of sour auto loans.


Analysts reportedly say these uncertainties mean providing credit will not necessarily translate into an immediate sales fillip.

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Fewer than 20% of new cars sold in China are financed, with large state banks dominating the market, the news agency noted, adding that Ford and Toyota nonetheless await a final nod for their own plans.


Volkswagen will invest 500 million yuan ($US60.4 million), the same as GM and its local partner, the German firm reportedly said.


“We are confident of starting operations within the next four to eight weeks,” Burkhard Breiing, chairman of Volkswagen Financial Services, was quoted in the statement as saying, Reuters noted.


GM reportedly has said it does not know exactly when its venture will start offering loans, as it too awaits a business licence.