Auto Expo 2020: With banking and non-banking financial companies under stress, the automotive finance segment, which has been a major enabler for the growth of automobile manufacturing, needed across the board deliberations to explore ways and means for developing a more collaborative ecosystem. The first of its kind summit on automobile financing kick-started the deliberations on many pertinent issues faced by the industry owing to economic slowdown.
11th February 2020|Greater Noida: While the automobile industry continued to amaze people with swanky vehicles, latest technologies, and future concepts, the Society of Indian Automobile Manufacturers organized a convention “Automobile Financing Summit” with the theme “Making vehicles travel from factories to homies” to deliberate upon the pressing challenges faced by the financial and automobile manufacturing ecosystem in pushing growth amidst economic slowdown.
About 85% of passenger vehicles, 90% of commercial vehicles and 50% of two-wheelers are financed in the country and hence financial sector plays an important role in auto sector growth. Currently the automobile finance and leasing industry is also going through a churning and new imperatives are emerging. With this background, the summit witnessed participation from leading minds across segments, including finance and marketing heads of automobile industry, bankers, NBFCs, automobile dealers, economists, and many more stakeholders participated in the event.
The Chairman of SIAM Finance, Leasing & Insurance Group Mr. Gopal Bansal welcomed everyone to the inaugural session of Automobile Financing Summit.
The automobile sector contributes 7-8% of GDP and is a major employment generator. Having strong forward and backward linkages with multiple segments, any negative impact to the automobile sector will have far reaching impact on the whole manufacturing sector. Credit financing sector has been the biggest enabler to the automobile sector, and therefore, it is essential for financial institutions, OEMs and Dealer Partners to come together & discuss a collaborative way forward”, Mr. Bansal said.
While stressing upon the rejection rate by banks, Mr. Bhuvan Dheer, Vice-President (Sales & Network) & Head-Retail and Channel Finance, Maruti Suzuki, explained the future expected growth of the industry.
“Despite the slowdown, the passenger vehicle segment is growing steadily as 9.2% CAGR from 2000-01 to 2018-19. In next 20 years, India is poised for huge growth and is expected to be around 12.4 million by 2040, as future growth will be driven by growth in penetration than population. He further added, since the passenger vehicle segment is expected to become 3-4 times in the next 20 years, same growth will also accrue to the finance industry.
In a dedicated session to debate the various challenges faced by banks in terms of financing vehicles for consumers, Mr. Ashok Khanna, Group Head – Vehicle Loans, HDFC Bank, voiced, “The financial institutions show a great risk capacity as it is the banks that lend its money to customers with major risk of non-recovery in the thin margin segment. Today, the inventory funding business is a nightmare, where a dealer seeks support from multiple banks. OEMs have to devise policies and work on projects, which would be conducive for dealers and financing partners. The OEMs, dealers, and financial institutions need to work together and make joint representation to the government.
“The challenges faced by the non-banking financial companies (NBFCs) are the same as those faced by the banks. The universe in which the manufacturers would work is the same for NBFCs, unlike banks. Slowdown reduces the book for NBCFs and makes dealer financing challenging. Also, compliances on NBCFs have become stronger,” said Mr. Kamesh Chaudhary, Head –Sales and Distribution, Volkswagen Financial Services.
The crucial role of dealer voice in the value chain, Mr. Nikunj Sanghi, Past President, FADA, said, “The dealer is left out of policy making. The policy making is done with all other stakeholders of value chain, including OEMs, Banks, NBFCs and Government. So for creating the strong room for policy, Dealer’s voice needs to be accommodated in policy making. For addressing present challenges, the first thing that needs to be done is to build systems of trust between various stakeholders and achieve highest levels of transparency. A new system of credit screening needs to be evolved.”
The day long deliberations discussed many other pertinent issues and industry trends such as the banking system transitioning from a local bank, to a network, to a connected ecosystem, and now to digital banking system; impact on two-wheeler segment, future products in terms of subscription-based vehicle leasing systems.
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| Photo Source: SIAM |
About 85% of passenger vehicles, 90% of commercial vehicles and 50% of two-wheelers are financed in the country and hence financial sector plays an important role in auto sector growth. Currently the automobile finance and leasing industry is also going through a churning and new imperatives are emerging. With this background, the summit witnessed participation from leading minds across segments, including finance and marketing heads of automobile industry, bankers, NBFCs, automobile dealers, economists, and many more stakeholders participated in the event.
The Chairman of SIAM Finance, Leasing & Insurance Group Mr. Gopal Bansal welcomed everyone to the inaugural session of Automobile Financing Summit.
The automobile sector contributes 7-8% of GDP and is a major employment generator. Having strong forward and backward linkages with multiple segments, any negative impact to the automobile sector will have far reaching impact on the whole manufacturing sector. Credit financing sector has been the biggest enabler to the automobile sector, and therefore, it is essential for financial institutions, OEMs and Dealer Partners to come together & discuss a collaborative way forward”, Mr. Bansal said.
While stressing upon the rejection rate by banks, Mr. Bhuvan Dheer, Vice-President (Sales & Network) & Head-Retail and Channel Finance, Maruti Suzuki, explained the future expected growth of the industry.
“Despite the slowdown, the passenger vehicle segment is growing steadily as 9.2% CAGR from 2000-01 to 2018-19. In next 20 years, India is poised for huge growth and is expected to be around 12.4 million by 2040, as future growth will be driven by growth in penetration than population. He further added, since the passenger vehicle segment is expected to become 3-4 times in the next 20 years, same growth will also accrue to the finance industry.
In a dedicated session to debate the various challenges faced by banks in terms of financing vehicles for consumers, Mr. Ashok Khanna, Group Head – Vehicle Loans, HDFC Bank, voiced, “The financial institutions show a great risk capacity as it is the banks that lend its money to customers with major risk of non-recovery in the thin margin segment. Today, the inventory funding business is a nightmare, where a dealer seeks support from multiple banks. OEMs have to devise policies and work on projects, which would be conducive for dealers and financing partners. The OEMs, dealers, and financial institutions need to work together and make joint representation to the government.
“The challenges faced by the non-banking financial companies (NBFCs) are the same as those faced by the banks. The universe in which the manufacturers would work is the same for NBFCs, unlike banks. Slowdown reduces the book for NBCFs and makes dealer financing challenging. Also, compliances on NBCFs have become stronger,” said Mr. Kamesh Chaudhary, Head –Sales and Distribution, Volkswagen Financial Services.
The crucial role of dealer voice in the value chain, Mr. Nikunj Sanghi, Past President, FADA, said, “The dealer is left out of policy making. The policy making is done with all other stakeholders of value chain, including OEMs, Banks, NBFCs and Government. So for creating the strong room for policy, Dealer’s voice needs to be accommodated in policy making. For addressing present challenges, the first thing that needs to be done is to build systems of trust between various stakeholders and achieve highest levels of transparency. A new system of credit screening needs to be evolved.”
The day long deliberations discussed many other pertinent issues and industry trends such as the banking system transitioning from a local bank, to a network, to a connected ecosystem, and now to digital banking system; impact on two-wheeler segment, future products in terms of subscription-based vehicle leasing systems.
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