Passenger vehicle fin mkt to hit Rs 1.63L cr by FY20: E&Y

The passenger vehicle finance market in India is expected to grow 2.1 times to touch a size of Rs 1,63,600 crore by 2019-20, according to a report by global consultancy firm E&Y.

The auto finance market in India has matured over time, making it one of the most developed auto finance markets in the Asian region, said the report 'Building a strategic and profitable auto finance portfolio in India'.

"The Indian auto finance market is poised for a breakout again and provides an addressable opportunity of over Rs 2,60,000 crore by FY20," it said.

The finance penetration is at 74 percent and non- performing asset (NPA) levels at sub-1 percent.

According to the report, the "new passenger vehicle (PV) finance market (is) expected to grow 2.1 times at approximately 16.5 percent (in) FY20 to Rs 1,63,600 crore (from) Rs 7,61,00 crore in FY15".

Explaining the reasons behind such a growth in automotive finance, the report said: "India is a large automotive market, expected to grow at a CAGR of 13 percent by value during FY16-FY26 to reach USD 300 billion".

By 2020, India's vehicle penetration is expected to increase by 50 percent albeit against a low base.

With a population size expected to hit 1.4 billion in 2020, and large majority of the population belonging to the driving age, it provides for one of the world's most attractive auto markets.

The growth in the automotive market is expected to be driven by India's strong demographic, socio-economic as well as well-developed industry fundamentals, such as credit infrastructure.

Commenting on the findings, EY Partner and India Automotive Sector Leader Rakesh Batra said: "The Indian auto finance market is a key enabler of growth for the automotive market. Both private and captive auto financiers are focusing on building a more holistic relationship with car buyers and dealers.

There is a significant scope of innovation in improving customer experience, customer lifecycle management and digital operations, he added.

Fali J Hodiwalla, Partner, Financial Advisory Services, EY said the Indian auto finance market has seen a significant transformation with key value drivers for the business moving towards building a more holistic relationship with both car buyers and dealers.

It had made car financiers to relook at their auto business strategy, he added.

One of the key findings is the emergence of captives (auto financing offered by manufacturers) as key contenders in the Indian automotive finance landscape.

Captives have been successful as they add value to the entire ecosystem OEM's, dealers and customers, particularly by their potential to offer differentiated financing schemes with relatively high levels of customisation.