Buffett-backed carmaker pulls out of sales financing

PUBLISHED : Thursday, 07 July, 2011, 12:00am
UPDATED : Thursday, 07 July, 2011, 12:00am


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Warren Buffett-backed mainland carmaker BYD has sent its car-financing joint venture to the scrap heap four months after it received approval from regulators in Beijing.

Shenzhen-based BYD's planned car-financing tie-up with a unit of French lender Societe Generale (SocGen) fell apart because the two parties 'have different evaluation on the potential risk in association with the business and cannot reach consensus on the business strategy', the carmaker said yesterday in a stock exchange announcement.

SocGen 'is of the view that the automobile market in mainland China is facing increasing risks'.

BYD and SocGen are among dozens of lenders and mainland carmakers to have set their sights on the car-financing market. While regulations facilitating lending for car purchases have been in place for more than a decade, the market remains nascent due to the cash-driven nature of car sales and the inability of would-be financing arms to raise funds.

Mainland car-purchase loans totalled 183.2 billion yuan (HK$220 billion) in 2009, about the same absolute level they were at in 2003, according to the most recent data available from the People's Bank of China. Car loans fell to 3.3 per cent of total consumer lending from 11.7 per cent during the same six-year period.

But the collapse of BYD's partnership with SocGen comes as car companies and lenders are showing new interest in prospects for car financing. A younger generation of twenty-somethings on the mainland is proving less averse to relying on credit than previous generations.

BYD and SocGen first unveiled details of their partnership in June last year.