ANALYSIS-Why China's car buyers need bags of cash
Reuters, 12.22.03, 3:14 AM ET
By Ben Blanchard and Michael Ellis
SHANGHAI/DETROIT, Dec 22 (Reuters) - Snappily dressed Shanghai businessman Xiu cruises the car market for a deal and, like most of his compatriots in the world's fastest-growing major car market, he plans to pay in cash.
"Yes, most people still use cash. But if you get a loan, that's like using cash, isn't it?" Xiu said, inspecting a new Mazda sedan near fashionable Nanjing Road.
"But I'll probably use cash," he added, poking at the engine.
Car companies hope auto financing - a new-fangled concept in China - will sustain sales after an initial explosion of pent-up demand peters out.
But aversion to debt, woeful credit ratings, lack of regulatory clarity and little or no legal protection for vendors are formidable obstacles, industry experts say.
"The demand is there, but there isn't the credit structure, the credit history, that's going to allow a quick ramp up to the level that we see in developed markets," said Michael Dunne, head of Automotive Resources Asia.
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