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Carmakers start own finance arms to drive sales

Posted on: February 2, 2009

The turmoil in the auto market is pushing carmakers to the corner, forcing some of them to start their own finance companies to fund
fresh car sales.

European carmakers, Daimler Motors, Skoda Auto and Volkswagen, are foraying into the Rs 22,000-crore auto loan market in the country. Indian auto majors, Bajaj Auto, Tata Motors and M&M, already extend loans through their own finance subsidiaries. Finance plays a pivotal role in sales as about 65-70% of new cars are sold on loans. The European auto companies are looking at generating incremental sales through their finance arms by meeting the needs of their potential customers.

( More… )


The Indian market is facing a credit crunch as most Indian banks and other lending institutions have tightened lending. About two years ago, 80% of the new vehicles sold in India were financed by loans and the annual market size was about Rs 35,000 crore. The rise in interest rates and absence of liquidity have brought this percentage down.

Source: Pricewale.com

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