China likely to cut auto credit interest rate to 6%

Shanghai, January 7 (Gasgoo.com) China's upcoming auto industry stimulus plan will focus on the auto credit by supporting the auto financing company and it is likely to relax credit requirements to cut loan interest rates down to 6% from the previous 10%, Shanghai Securities News reported today.

In the auto industry stimulus plan set up by China's NDRC, to create a more convenient auto credit environment plays a very important part.

An auto group official close to the matter said automakers all put forward their opinions before the stimulus plan is submitted, hoping to reform the financing environment by exploring low-cost financing channels, including encouraging issuing medium-term notes and bonds.

Currently, China's auto financing companies are obsessed with narrow financing sources. The cash of auto financing companies mainly comes from shareholders' deposit and some assets securities business, which are far from enough to support the companies' development and present a high-cost financing.

Once the loan interest rates drop for auto financing companies, it will stimulate car sales to some extent. China's National Passenger Cars Association said the global auto loan ratio is about 70%. In America, car purchasing on credit accounts for 80%-85%, German is 70%, and India is 60%-70%, while China's auto credit has fallen to 8% from 16% of 2004. If that figure recovered to 13%, it would stimulate auto sales to increase by 4%.