Shanghai. March 11 (Gasgoo.com) - China's auto financing companies gained RMB16.47 million($2.31 million) in profits last year, marking the first year for the industry to turn profitable since the first auto financing company opened four years ago, reports Beijing Daily today.
"Back in 2006, non-performing loans in vehicle consumption sector rose to a new high, as some commercial banks tightened lending which in turn gave the auto financing companies an opportunity," said Wang Hong, expert from B. Thinking Management, a Shanghai-based company providing consulting service for the auto financing industry.
Since 2004 when G.M. began operating China's first auto financing company, auto financing industry has been a money-losing business over the past few years, as commercial banks are the only vehicle to offer auto financing loans.
"In 2007, China tightened monetary policy and banks were ordered to reduce lending. And that revived the business of auto financing companies," added Wang.
Currently nine companies have gained approvals to operate auto consumption lending business from China Banking Regulatory Commission, and eight of them have started business in China.
By the end of 2007, the eight companies have a total asset of RMB28.498 billion, a credit balance of RMB 25.515 billion, liabilities of RMB22.822 billion and ownership interest of RMB5.676 billion, according to B. Thinking Management.
"This year will be positive for the auto financing companies based on the current situation,” Wang forecasts.
