Ah, the Sweet Smell of Validation

February 29, 2008

Two years ago, when wondering why there are so few small cars in China, I hypothesized:

Chinese banks are not particularly customer focused, and are reluctant to give car loans to anybody whose income level is not high enough to make a midsize car affordable. Chinese banks would have little or no experience with consumer finance, and without competition from foreign banks, they would have no incentive to create consumer finance products either. That makes life difficult for anybody who wants to upgrade from a motorcycle to a small car.

And this year, Andy Mukherjee writes:

The problem of financial underdevelopment isn’t restricted to home loans. Since credit checks are perfunctory, cards come with low spending limits and have lukewarm acceptance. Auto finance is still in its infancy. A survey conducted in April last year by consulting firm KPMG LLP and Taylor Nelson Sofres Plc, a market researcher, showed that while 25 percent of car buyers in China had access to finance, few actually opted for it.

A warm fuzzy feeling pervades. This still doesn’t prove that the lack of small cars in Qingdao is because there are no auto finance companies there, but it strengthens my hypothesis. Such joy. Such joy.