The Telegraph
Since 1st March, 1999
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Car finance firms go into an overdrive

New Delhi, March 23: Demand for loans to fund automobile purchases would nearly double to Rs 27,000 crore in the current financial year 2002-2003 compared with 2001-2002, according to a study conducted by rating analyst firm Icra.

The study states that 75 per cent of the total auto purchases in 2001-02, or about Rs 15,000 crore, was financed by banks and financial institutions. The spur in auto financing fanned the demand for automobiles and fuelled growth of organised car finance market in the country, it added. “The loan market is poised for a rapid growth in the next two to three years.”

Among the major financiers are foreign and private sector banks, regional financiers like Sriram Transport Finance, Orix Auto Finance and some large non-banking financial institutions such as GE Capital and Sundaram Finance.

The report said banks and financial institutions also funded 73 per cent of the commercial vehicle purchases and 63 per cent two-wheeler purchases worth Rs 10,0000 crore.

In the 2003-04 budget, the government has cut excise duty on motor cars from 32 per cent to 24 per cent and customs duty by 5 per cent to 25 per cent — a move to bring down peak customs duty to the Asean level of 20 per cent by 2004.

Analysts said that the lower excise rates would fuel a surge in demand which, in turn, would power the banks and financial institutions loan portfolio for the auto sector.

“Car demand will grow by 10 per cent a year in the next decade helped by low penetration, rising incomes and better loan-finance schemes,” said an analyst.

For a nation of over a billion people, the country has a small car market and it’s 15 vehicle makers had sold only 6,89,830 cars and utility vehicles in 2001-02 although vehicle penetration is low.

Only four of every 1,000 Indians own cars, compared with 35 in Thailand, 92 in Brazil, 187 in South Korea and 450 in the developed world.

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