Global auto giant General Motors Corp announced it will raise interest rates in its auto-financing division in China, one day after the country's central bank also increased rates.
GMAC-SAIC Automotive Finance Company Ltd, a joint venture between GM and SAIC Financing Corp, said it would raise its car loan rate to both auto buyers and dealers, it said in an e-mail reply to Shanghai Daily yesterday. The company did not elaborate.
The move comes one day after China's central bank would raise the benchmark rate of a one-year loan 0.27 percentage point to 5.85 percent. The move was designed to cool down rapid economic growth.
Bloomberg News earlier reported that GMAC-SAIC would also add 0.27 percentage point to its loans, now at 7.62 percent, to keep pace with the central bank's rate increase, citing Christian Weidemann, general manager of GMAC-SAIC.
”Both GM's financing for consumers and dealers are linked to the benchmark rate and we will raise the rate accordingly,” said Weidemann. He did not say when the higher rate would take effect.
Toyota Finance Corp, Volkswagen Finance (China) Co Ltd and Ford Automotive Finance (China) Ltd did not raise car loan rates. Each company said it was considering raising car loan rates, but would make an announcement at a later date.
However, the increase may have a limited impact on wholesale financing as more than 80 percent of car loans were to auto dealers.
"It would not be a heavy burden for us because most authorized dealers have financial strength," said Zhang Hui, an auto dealer.
But he was concerned the increased rate may cause potential auto buyers to drop purchase plans.
China's retail car financing marker is smaller than Western countries. Only 10 percent of auto buyers in China applied for car loans last year compared to 80 percent in the US market.
(Shanghai Daily April 29, 2006)