Blog: Dave LeggettGM financing milestone in China

Dave Leggett | 12 November 2003

I've just received a press release from GM's automotive financing division - GMAC - saying that in the last ten minutes (and it's unusual for GM releases to be worded in such dramatic fashion) it has been granted a license to to provide automotive finance in China and is the first foreign financing company to this particular post. It's a joint venture with a Shanghai outfit, but it is certainly good news for GM.

The Chinese government has been very slow to allow foreign players in to provide consumer finance generally. International banks have been hamstrung in operating in China in lots of different ways (the government preferring to stay firmly in control via heavy regulation and a primacy role for state banks). But consumer finance really is the key to getting customers for all those cars that the carmakers are planning to churn out there. GM says it is the first to apply for a license, so it could be at a significant competitive advantage here. Buick Sail (basically booted Opel Corsas) sales in China could really fly on the back of this when the arrangements are in place. GM has recently added the Daewoo Lacetti/Nubira too (sold as the Buick Excelle - great name).

The already sizeable 'emerging' urban middle class needs to have access to finance for big ticket items like cars. Just selling cars for cash to the super-rich and for use as business tools/taxis won't be enough to support the sort of capacity that is going into China.

Other manufacturers, I think, should be quizzed quite closely on their finance strategies for China.

Richard J.S. Clout, Executive Vice President of GMAC International Operations, says in the release: "Globally auto manufacturers sell about 70 percent of their production through auto finance deals while in China it is a meagre 15 to 20 percent. We expect auto financing business will grow 60-80 percent in the coming years."

The full news item will be on just-auto later today.


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