Credit squeeze hits car sales

October 5th, 2008 - 2:27 pm ICT by IANS  

Mumbai, Oct 5 (IANS) Retail car sales by the Indian automobile industry have been hit hard by the squeeze on retail financing as banks have stopped hardselling car loans in the current economic climate, say auto industry representatives.Unlike in the past, when customers used to be inundated by phone calls from banks offering car loans, many banks are now unwilling to provide automobile loans.

“Even a few months back it was easy to get car loans, but not any more. Now, banks are always looking for ways to turn down deals,” Honda Siel Cars India Ltd marketing vice-president Jnaneswar Sen told IANS.

The credit crunch has made automobile dealers scramble to find loans for their customers. “We’ve reports that customers are coming in but getting them car loans has become a tough task,” said Western India Automobile Association president Deepak Kapadia.

According to Sen, 75 percent of sales are made through such financing. “Many customers are shying away or postponing big-ticket purchases such as cars,” he said.

In September, premium car maker Honda saw its sales drop 45.2 percent to 3,104 units from 5,674 units in the same period last year.

Even cars in the mid-market segment are stuck in first gear. Tata Motors saw its sales dip by nine percent to 16,586 units against 18,216 last year, whereas Maruti Suzuki posted a marginal 2.53 percent increase in sales to 64,682 units, compared to 63,086 in September last year.

To add to the industry’s bumpy ride this festive season, top financiers like ICICI Bank and Kotak Mahindra Bank are considering a 100 basis point hike in car loan interest rates next week.

An analyst from a leading brokerage firm, who chose not to be identified, told IANS: “Financiers are already expecting a 15-20 percent dip in total disbursals this season. Three years back 90 percent sales were financed vehicles, but now it’s down to 60 percent.”

Banks like HDFC, which disbursed about Rs.80 million in auto loans last year, expect around Rs.75 million in disbursals this year, while ICICI Bank, which disbursed Rs.120 million last year, is expecting a 20-40 percent cut in disbursals, he added.

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