SHANGHAI -- Greenway Asia LLC, which operates two Ford dealerships in China, is successfully enticing reluctant consumers to borrow money to buy cars.

 

Three years ago, Greenway began offering Ford loans to buyers in China. Today, its Ford dealership in Kunshan arranges loans to 17 percent of buyers, while its Anting dealership arranges loans to 12 percent, says Yemao Huang, CEO of Greenway. Both dealerships are in Jiangshu province.

 

  "A lot of dealers try to introduce financial services, but we're successful as we've had experience in the States," says Huang.  Greenway is controlled by an American dealership company, Greenway Automotive Group of Orlando, Florida.

 

Why is there is a stigma to borrowing?

 

Duan Chengwu, a senior research analyst at Global Insight, says in Chinese culture. borrowing money implies you don't have the money to spend. "Chinese people don't want to show their poverty to others," says Duan. "If they borrow they think others will immediately think they are poor."

 

Mei Songlin, general manager of research at J.D. Power's China operations, says that less than 10 percent of buyers in China use loans to purchase cars.

 

Five years ago, banks were aggressively promoting auto loans in China. However, many banks got stung by bad loans and tightened lending policies.

 

However, with the current financial crisis, car loans are back in favor. As the economy weakens, automakers and state-owned banks are promoting loans to encourage sales, says Mei.

 

So why is Greenway successful at enticing buyers to use credit financing?

 

Like nearly all U.S. dealerships, Greenway dealerships have Finance & Insurance departments staffed by specially trained managers. Greenway also trains its sales staff on auto loans.

 

Plus, its showrooms are arranged so that when a customer sits down they see advertisements and information on its auto loans, says Huang.

 

Since most car buyers are unfamiliar with auto loans, Greenway staffers take the time to explain them, he says.

 

Greenway does not make more money directly if a buyer borrows money. "Finance or cash is both the same to us," says Huang.

 

But, borrowers buy a two-to-three year physical-damage insurance policy. This encourages the buyers to visit the dealership for parts and service, which boosts dealership profits.

 

Buyers who pay cash for their cars generally only take out a single-year insurance policy.   

 

Encouraged by the success of its its two dealerships, Greenway is expanding.

 

The new full-service dealership is in Taicang, Jiangsu province, between Kunshan and Anting.

 

The Taicang  dealership will open just after the Chinese New Year, says Huang. He expects to sell about 960 cars per year at the dealership.

 

The average dealership in China sells about 600 cars per year, Power's Mei says.

 

In 2008, the Greenway group sold 2,154 Ford vehicles. This year, Huang is expecting to sell 2,500, but in 2010 "we hope to exceed 3000."

 

Greenway also has two sales-only centers in Shanghai, in Qingpu and CaoAn Lu.

 

Huang and his partners, U.S. dealers Carl Atkinson and Frank Rodriguez, are not satisfied with selling just Ford cars. The plan is to expand with dealerships for Japanese brands.