Volvo enters vehicle financing market in China

Sweden's Volvo Group said on Thursday it had launched an automotive finance arm to support its commercial vehicle business in China, one of the world's fastest growing automobile markets.

The unit has invested 500 million yuan (62 million dollars), the minimum required by regulators.

Goran Albertson, the finance director of Volvo AB, said the company expects to achieve a 30 percent market share in China’s construction equipment and commercial trucks sector.

“In very mature markets such as Europe we have a penetration rate of 15-20 percent … so here in China we have made a relatively conservative business plan and we think we can at least achieve 30 percent penetration,” he said.

But Francis Sum, the general manager for the China business, noted that the venture would be restricted by regulations governing vehicle financing.

Automobile finance providers in China cannot lend more than 75 million yuan to a single entity, which has prevented companies from fully exploiting opportunities for vehicle fleet sales and large dealership contracts.

China National Heavy-Duty Truck Corporation and Volvo, Europe’s second-largest truck maker, founded a truck manufacturing joint venture three years ago.

Each company contributed 35 million dollars in capital to create the Jinan Huawo Truck firm, which makes three models of Volvo trucks.

Auto sales in China rose 26.7 percent annually in the first half to 3.54 million vehicles, according to previously released official data.