Two-wheeler manufacturers are ready for life after ICICI.
Most automobile companies have decided to enter the finance business by either expanding their non-banking finance arms or through tie-ups with local financers.
ICICI, the largest private sector bank in India, has decided not to provide two-wheeler loan facility through its dealer network as part of its efforts to cut down expenses. The bank, however, will provide two wheeler loans at its branches.
TVS Motor and Bajaj Auto, two of India’s largest two-wheeler manufacturers, have almost finalised alternate arrangements to finance their businesses. “This would mean better service for customers,” said S Sridhar, CEO, two-wheelers, Bajaj Auto. “However, we would ensure that the customers’ credit history is properly scrutinised”.
While both the companies have expanded their in-house finance arms, TVS is also looking at outsourcing finance to local financers to fill in the gaps at its showrooms across the country. The company has been in talks with up to six local financers in various regions besides its own finance arm, TVS Finance.
“The question is not of credit, it is of the need for two-wheelers in India, and we are working out a strategy to fill the need,” said HS Goindi, head of sales, service and marketing, TVS Motor. “Since local financers have better local knowledge, they will be able to figure out a way to ensure credit quality.”
Bajaj Auto Finance Ltd, the finance arm of the Bajaj Group, has decided to enter the two-wheeler finance market.
“Mercedes Benz, Audi are among some companies abroad who have been very successful in finance businesses. We feel this is an opportunity,” said Sridhar.
BAFL was on the expansion mode since last six months, Sridhar said.
While the companies said that ICICI Bank’s pullout would hurt two-wheeler makers, they also said that the quality of credit is not necessarily a killer. “There is a huge need for two-wheelers in the Indian market, and we have seen growth at TVS in the last two months,” said Goindi.