The Hindu Business Line : Hyundai Motor may bring auto finance arm to India

Financing options
One of the main reasons behind the move is the fluctuating interest rates in India.
The financing arm could also come in handy whenever it wants to lift its sales.

Bangalore April 10 Hyundai Motor is expected to bring its instalment auto-financing unit Hyundai Capital Services Inc to India to service its expanding customer base.

Hyundai Motor India's Executive Director for marketing and sales, Mr W.S. Min, said there was a possibility of Hyundai Capital Services being set up in India even as the carmaker is doubling its capacity to 6 lakh units. "With our customer base going up, there is a possibility that that we could look at bringing Hyundai Capital to India," Mr Min said.

Hyundai's other financial arm is Hyundai Card, a credit card unit. In South Korea, Hyundai Capital Services owns over 60 per cent of the market share of the domestic auto finance business.

But sources also point out that one of the main reasons for Hyundai to look towards Hyundai Capital Services is because of the fluctuating interest rates in India. The recent increase in interest rates, according to an official with the company, is expected to considerably slow down car sales during the current fiscal. To derisk its sales from such market conditions, Hyundai wants to have its own auto finance company in place, sources said. During the last few years, car sales have more than doubled because of extremely attractive interest rates in the country.

Additional Burden

As an immediate measure to lower the impact of recent interest rate hike on its sales, Hyundai rolled out a special finance scheme offering reduced rates for buyers of Santro. The interest rate has been reduced to 8.99 per cent from the market rate of about 16 per cent for a three-year loan term with a loan ceiling of Rs 3 lakh. The burden will be shared among the dealers, Hyundai Motor and the domestic finance companies.

However, the scheme is for a shorter duration of 10 days because longer tenures could mean additional burden on dealers who operate on thin margins.

Customised Schemes

If Hyundai wants to remain competitive in the market despite issues like fluctuating interest costs or even changes in pricing, it can use its auto financing arm to launch customised schemes for its customers at various stages of the year, sources said. The financing arm could also come in handy whenever it wants to lift its sales, particularly during the lean season, according to sources.

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