Hyundai and BAIC Establish China Auto Financing Venture image

Tuesday, September 25th, Hyundai announced it had established in China an auto financing venture with BAIC Group.

The auto financing venture will help Hyundai take advantage of the continuously growing interest in car loans in China, where most consumers still pay in cash. This venture will also reduce Hyundai and Kia’s need to offer cash discounts to be able to compete with rivals such as GM which has been longer in China’s auto financing.

In 2002 Hyundai entered China in partnership with BAIC and in the first half of this year it was the third-biggest selling automaker in the country after GM and Volkswagen with 8.9% share. The venture with BAIC will be called Beijing Hyundai Auto Finance and 60% of it will be owned by Hyundai.

“Only 10 percent of car purchases are financed by loans in China, a ratio that the industry estimates will triple by 2017,” Ted Chung, CEO of Hyundai Capital, said in a statement.

In the past year Hyundai was the fastest growing automaker in China, but the limited manufacturing capacity has affected the automaker’s growth. But Hyundai has already made a strategic plan, beginning production at its third plant in China, while Kia will start production at its third facility in 2014.