HMSI says retail financing for vehicles better in August

Retail financing for vehicles has started "coming back" in August after a dip in July as the employment situation seems to be getting better, according to a senior executive of Honda Motorcycle and Scooter India.

Generally, automakers rope in banks and non-banking financial institutions to offer tailor-made financing solutions for their customers. In the wake of the coronavirus pandemic, many players in the automobile sector, including big companies, are offering credit facilities for purchasing vehicles to help boost sales.

During the October 2019-June 2020 period, the weighted average lending rate of domestic banks declined in respect of fresh rupee loans sanctioned for vehicle loans by 102 basis points, according to the Reserve Bank of India (RBI).

"In July, we saw a little dip in percentage in retail finance because on ground, the situation was a little difficult," Y S Guleria, director (sales and marketing), Honda Motorcycle and Scooter India (HMSI), told PTI.

Retail partners had become a little more stringent in terms of some customers who belonged to some industries that suffered the most because of the lockdown.

(HT Photo/Sunil Ghosh)

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(HT Photo/Sunil Ghosh)

According to available public data that shows that the unemployment ratio has eased out a bit and some re-employment is back, Guleria said employment opportunities seem to be starting to increase again.

Even the retail finance penetration has improved in August compared to July, he said.

"It (vehicle loan financing), however, is still less than what we expected. Last year, it was about 45-50 per cent which came down to less than 45 per cent in the first 2-3 months of this fiscal, because financiers tightened their purse on account of liqudity issue in the market," Guleria said.

Further, he said all customers who have opted for moratorium on their existing home or personal loans were put under negative profile by the retail finance partners. "That is why we saw a little slowdown in retail finance but it has now started coming back," he said.

Earlier this month, rating agency ICRA revised downwards sales forecast for two-wheelers in India and projected a decline of 16-18 per cent to around 1.7 crore units in 2020-21.

Prior to the coronavirus pandemic also, domestic demand for two-wheelers was expected to be flat amid a sharp rise in vehicle prices following transition to BS 6 emission norms and subdued macroeconomic situation.

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