The auto industry is faced with the problem of financing should be more than one way to break the financing bottleneck
Guangzhou wanbao group refrigerator Co. Ltd. , https://www.wanbao-refrigerator.com
In fact, the automotive industry as a whole is facing significant challenges in securing financing. Even large enterprise groups struggle with limited access to capital. This issue was highlighted during an interview with Zhang Shulin, former executive vice director of the China Association of Automobile Industries, when the *Financial Times* reporter discussed the "Eleventh Five-Year Plan" for the sector.
Over the past few years, many non-automotive companies have entered the auto industry, and private investors have poured money into car manufacturing at all costs. Yet, despite the industry's popularity, many companies still find it difficult to obtain funding. This raises the question: if the auto sector is so hot, why do firms face financial constraints?
One major issue is the limited number of financing channels available. A mid-level manager from a major vehicle company told the reporter that their firm isn't short on money and is currently seeking new investment opportunities, particularly in parts and components. However, insiders suggest the company is actually struggling financially. Previously, they had plans to bring in offshore capital through a partnership with a foreign firm, but the deal has stalled due to certain factors, leaving them unable to raise funds abroad.
Analysts point out that the auto industry is highly capital-intensive, requiring hundreds of millions in funding. Relying solely on banks has become increasingly difficult. Many Chinese auto companies operate with debt levels exceeding 50%, mostly from bank loans. With shifting national policies and macroeconomic conditions, over-reliance on traditional banking is no longer sustainable.
Zhang Shulin noted that current auto financing mainly depends on internal resources. Introducing foreign capital for new plants is restricted by policy, and with global automakers like the 6+4 lineup already established, new projects require substantial investments. This creates a significant funding gap.
In response, the stock market has emerged as a new financing avenue. While few auto companies openly admit to financial difficulties, some executives have been actively pursuing listings in recent years—both domestically and in Hong Kong. In 2005, the auto industry saw a surge in stock market fundraising, with over 10 billion yuan raised. That year, 12 auto-related companies were listed on the Shanghai and Shenzhen exchanges.
Many parts manufacturers also turned to the stock market, including companies like Changchun Changling, Hunan Torch, and Wanxiang Qianchao. These listings helped fuel growth, and several component firms are now accelerating their listing strategies.
However, while external financing can provide relief, experts warn that companies must be cautious. Zhang Xiaozheng, vice president of the China Federation of Machinery Industry, emphasized the need for discernment when dealing with foreign capital, which always seeks returns. He stressed that long-term success relies not only on funding but also on building talent and technology.
Zhang Shulin suggested that the government could support the development of sales service systems and encourage auto manufacturers to explore alternative financing methods, such as establishing financial companies. He believes these entities could help bridge gaps in the banking system.
Experts also recommend stronger collaboration between automakers and dealers to secure stable financing and favorable interest rates. From the bank’s perspective, supporting well-established auto companies and dealers can lead to steady returns, creating a win-win situation for all parties involved.