Some Chinese banks vow to rein in commissions given to car dealers for auto loans
Chinese authorities have been keen to curb a deepening price war in the car industry and what they see as excessive competition among automakers.
According to industry sources, some Chinese banks offer car dealers high commissions to lure borrowers and the dealers then use that money to provide discounts to car buyers, stimulating sales. The sources were not authorised to speak to media and declined to be identified.
China Everbright Bank's (601818.SS), opens new tab Zhengzhou branch, Henan Rural Commercial Bank and Bank of Communications' (601328.SS), opens new tab Henan branch also said in statements that they will prevent car dealers from making it compulsory for customers to take out a car loan.
The practice increases borrowing costs for consumers and ultimately harms the interests of both consumers and financial institutions, the lenders said.
The banks added that interest rates on car loans should be no more than 6%.
Until recently, the price war that began in early 2023 had shown little sign of abating, and tensions have been running high with some auto executives questioning the health of the sector.
China's industry ministry summoned automakers to a meeting this month where they were told rein in the price war and excessive practices that have hurt the industry's supply chain.
Since then, automakers have pledged to make payments to suppliers in 60 days, responding to an outcry from steelmakers over long payment times.
Chinese auto dealers have also complained, calling on automakers to stop offloading too many cars on dealerships, saying the intense price war was damaging their cash flow, driving down their profitability and forcing some to shut.
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