No job, no EMI?: Why car makers are looking at unveiling unique finance offers

Desperate times require desperate solutions. And these are indeed desperate times for auto makers around the world. With demand for new vehicles at record lows in several countries, showrooms wear a deserted look and a costly investment may be the last thing on the minds of people. For all the talks of preference for personal mobility, brand-new vehicles are largely finding no new takers and this has led to many OEMs tying up with financial institutions to offer solutions that may have appeared 'too good to be true' just a few months back.

In India, April turned out to be a nightmarish month for auto makers with sales nosediving to near-zero levels. The national lockdown in place to check the spread of Covid-19 resulted in factories being locked up, showrooms closed and people largely staying indoors with an obvious impact on sales. The first few weeks of May have been about repair work for most OEMs as factories, showrooms and workshops in areas not deemed to be in containment zones have gradually resumed operations. Even then, numerous surveys have shown that buying a vehicle is likely to be a decision either pushed back or put off altogether.

This could be terrible news for the industry which had already waded through a troubled 2019. Car makers such as Maruti Suzuki, Hyundai and even luxury brands like Mercedes-Benz are offering financial solutions that claim to iron out doubts that may persist in the minds of prospective customers. In the last week alone, Maruti Suzuki announced tie-ups with at least three financial institutions - Cholamandalam Finance, ICICI and HDFC. Hyundai has offered industry-first EMI assurance program in case of job uncertainty. Mercedes has launched the 'Wishbox 2.0' campaign and claims it will financially empower customers. Nissan has rolled out several offers which cover women car loan applicants and profession-based products for salaried employees, self-employed people, police personnel. etc. Several other manufacturers have also either announced schemes or are in the consideration phase.

In the UK, Fiat and Alfa Romeo recently announced waiving off up to seven months of car finance payments if a customer loses his or her job within the first 12 months of the financial agreement. Daily Mail reported that the two car makers are the first of possibly many to go down this road and that the job loss protection facility will be valid for all of their new cars financed or leased between June 1 and September 30.

In China, the world's largest car market, there was a plan to scrap subsidy on electric cars this year. That plan itself has now been scrapped even if conditions which make a vehicle qualify for subsidy has been tweaked. Several cities in the country are also offering incentives to people to get rid of their old vehicles and buy new cars in what is seen as their respective efforts to help OEMs.

Auto sales in the US may have begun to recover but the extent of damage caused will make it a long and winding process. Reuters recently reported that the year will see around 13.8 million vehicles being sold which is significantly lower than the figure of 17 million previously projected. As such, CNBC reported that massive offers like Memorial Day discounts and 0% financing options for up to 84 months are aimed at healing painful wounds of the automotive industry here.

Offers and schemes may work in different countries in different ways and with varying results. Experts most shy away from making concrete predictions but also agree that lockdowns, work from home situations and financial uncertainties will challenge the new-car business.