SHANGHAI -- Volkswagen AG expects to offer car loans to customers in China in four to eight weeks after joining rival General Motors in winning approval to operate a domestic auto financing arm.
Europe's biggest automaker is going it alone in offering car loans in China, unlike GM, which has established a joint venture.
VW now awaits the granting of a formal business license, it said in a statement on Friday, as it gears up to enter the largely untapped market.
Foreign players hope car financing will spur the next stage of market growth, even though China has no central credit rating agency, no laws to repossess cars from errant borrowers, and -- after a few years -- a swelling pool of sour auto loans.
Analysts say these uncertainties mean providing credit will not necessarily translate into an immediate sales fillip.
Fewer than 20 percent of new cars sold in China are financed, with large state banks dominating the market.
Nonetheless, Ford Motor Co. and Toyota Motor Corp. await a final nod for their own plans.
VW will invest $60.4 million, the same as GM and its local partner, the German company said.
"We are confident of starting operations within the next four to eight weeks," Burkhard Breiing, chairman of Volkswagen Financial Services, was quoted in the statement as saying.
GM has said it does not know when its venture will start offering loans, as it too awaits a business license.
China is expected to become the world's second largest auto market, after the United States, by 2010, according to consultants McKinsey.
Foreign automakers plan to spend $13 billion tripling production capacity in China to 6 million cars a year by the end of the decade, prompting fears of a margin-sapping glut.
But growth in car sales is expected to slow to 10 percent to 20 percent this year after sales nearly doubled to 2 million units in 2003, as Beijing's credit curbs put off would-be car buyers.
Car sales in China rose 1.6 percent in July from June, snapping a three-month decline, official data show, though analysts warned against premature celebration.
Auto financing has proved to be a big money spinner for GM in more developed markets in the United States and Europe.
Its financing unit, General Motors Acceptance Corp., earned a record $860 million in the second quarter to June, up from $834 million previously, accounting for about 64 percent of GM's total earnings.