Shanghai VW auto dealer sells 50% stake for debt

Shanghai Automobile Industry Hudong Sales Co, a dealer of cars made by Shanghai Volkswagen Co Ltd, is selling a 50-percent stake due to its inability to pay a debt.

Five potential buyers, including a car maker, have applied to buy Hudong's stake after a one-month bidding period ended on Tuesday, according to an official from Shanghai United Assets and Equity Exchange. Hudong Sales invited bids for the stake sale which started at the lowest bidding price of 1 yuan (US$0.15).

According to information for bidders, total assets of Hudong Sales were worth 47.15 million yuan while it has a debt of 47.58 million yuan.

Zhong Shi, an independent auto industry analyst, believed the auction marked the beginning of a reshuffle and consolidation among dealers and it will soon spread to the whole industry.

Auto dealers have been struggling with tight credit since last year when the government adopted harsh momentary policies. A sharp decline in vehicle sales starting in the middle of the year placed a heavy financial burden on them and prompted some small dealers nationwide to file for bankruptcy.

Industry insiders also forecast that more dealers will be driven out of the market next year if the sluggish vehicle sales continue.

Auto sales in China fell in August and September and only posted an 8.36 percent year-on-year rise in October, against an average 20 percent growth last year.