‘Access to finance has scripted automotive sector’s growth’

Call it a silent revolution or a well-planned expansion, the proliferation of banks, NBFCs and financial institutions into the remote parts of the country has played a major role in the growth of the country’s automotive sector, according to a senior executive of the Society of Indian Automobile Manufactures (SIAM).

In 2016, off the 707 districts in the country, people living in more than 600, barring some remote locations, had access to finance to purchase vehicles, according to Arun Malhotra, Chairman, SIAM Trade Fair Group, and Senior Corporate Advisor, Nissan India.

An industry veteran, Malhotra told BusinessLine that the automotive industry’s current growth of about 10 per cent would not have been possible but for the proliferation and reach of financing options into the country’s remote parts and small towns. Apart from major metros and top cities, a significant chunk of sales comes from semi-urban and rural parts. The percentage of sales in rural parts varies between manufacturers.

In the past few years, vehicle buyers have had options to choose from several finance options, including banks, financial institutions and NBFCs.

Typically, these finance institutions are located within a reach of each other, or at times located at one central building in districts, making it a hassle-free experience for buyers.

“Our estimates show that 75-80 per cent of passenger vehicles in the four-wheeler category are sold through finance options. About 40 per cent of two-wheelers and nearly 100 per cent of commercial vehicles follow the same norm,” he said.

“As against a growth of about 8 per cent last financial year, FY2018 is expected to witness a growth by about 9-10 per cent, to close at about 3.5 million vehicles. Significantly, there has been a resurgence in sales of two-wheelers in the country, and we expect to see an overall sales of about 20 million two-wheelers this fiscal,” Malhotra said.

“Having travelled extensively over the past decade, I have witnessed significant changes in the semi-urban and rural parts of the country. There is a generation of young aspirational population willing to buy new cars. The availability of financing options and the growth of dealerships have aided in the expansion of the automobile market in the country,” he explained.

Malhotra said the headwinds the sector had to face over the past 12 months due to demonetisation and GST are being gradually put behind, and the industry is looking to better times. However, there continue to be certain anomalies in the State taxation structure covering Registration and Road Tax.

These also need to be standardised, he felt.

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