The next time you walk into a two-wheeler showroom, don’t be perplexed if you find it difficult to get a vehicle loan from the banks. Rising non-performing asset (NPA) levels have forced banks to become extra cautious in lending to the two-wheeler sector which, besides the commercial vehicles segment, has become more vulnerable to repayment defaults. More on this later but before that here is a complete brief on all the important developments in the auto space this week.
Tesla in talks with Karnataka
Karnataka has offered Bengaluru as the destination for Tesla’s Indian Gigafactory, and the company has already held preliminary discussions for a research and innovation unit in the city.
Bengaluru is likely a shoo-in for Tesla as its Indian unit – acquired from Toyota in July, is based in the city. Besides, other EV makers such as Ather Energy, Bosch, Daimler, Mahindra Electric and Ola Mobility are also based in the area.
Hyundai India produces more cars than China
India marched past China to turn out the highest number of Hyundai cars outside South Korea in 2019, producing one in every four of the company’s cars worldwide.
This is despite China having Hyundai’s largest production capacity in the world outside South Korea and twice its capacity in India.
Electric two-wheeler demand rise
High-speed electric two-wheeler sales have grown 18 percent year-on-year (YoY) since June 1, highlighting a growing consumer interest in electric mobility post the lockdown.
According to data shared by the Society of Manufacturers of Electric Vehicles (SMEV), 6,976 high-speed electric two-wheelers have been sold between June and September, compared to 5,897 units sold in the same period last year.
MG launches Gloster at Rs 28.98 lakh
MG has just announced prices for its new flagship SUV set to rival the likes of the Ford Endeavour, Mahindra Alturas G4 and the Toyota Fortuner.
The new full-size SUV was first showcased at the 2020 Auto Expo. While all the details of the SUV had already been shared, prices were kept under wraps.
Car sales gather steam
For the first time in 2020 retail sales of cars and SUVs in a month surpassed sales of the same month last year, signalling a pickup in consumer demand.
As per data shared by the Federation of Automobile Dealers Association (FADA), retail sales of passenger vehicles (PV) during September grew nearly 10 percent to 195,665 units as against 178,189 units clocked in the same month last year.
Mercedes-Benz rolls out EQC at Rs 99.3 lakh
German luxury carmaker Mercedes-Benz on Ocober 8 kicked off its electric vehicles journey in India with the launch of EQC model at an introductory price of Rs 99.30 lakh.
The all-electric SUV, which is the first product under Mercedes-Benz EQ brand, is powered by an 80 kWh lithium-ion battery with a range of 445-471 km on a single charge.
Banks go cautious about lending to two-wheelers buyers
While the Reserve Bank of India (RBI) announced reductions in lending rates over the past few months, banks have been reluctant to get the two-wheeler buyer to benefit from the lowered rates. This has led to a decrease in vehicle financing for the two-wheeler sector which is now estimated to be at 40 percent from more than 50 percent about two years ago.
“In the run-up to the festive period, banks usually come out with attractive finance schemes. But this year, in light of rising NPAs, banks have not at all been proactive in lending to the sector. Consumers are either forced to go for NBFC loans or opt for an all-cash deal,” said a senior executive of a two-wheeler making company.
Two-wheelers are not considered to be a prime lending segment for the financial institutions given that a large part of the two-wheeler market (more than 50 percent) is made up of the low-cost, entry-level motorcycles. These are mainly bought by buyers belonging to the low-income group thereby making them vulnerable in extreme situations like a lockdown.
The RBI, in a report, said public sector banks’ gross bad loans ratio of 11.3 percent at the end of March may increase to 15.2 percent by March 2021 under the baseline scenario. Private banks may see an increase from 4.2 percent to 7.3 percent.
Yadvinder Singh Guleria, Director Sales and Marketing, Honda Motorcycle and Scooter India, said, "Banking is one of the most important enablers for us. With a couple of measures taken by the RBI and the central government, it is imperative that they (banks) would be extending loans to two-wheeler buyers, which was not visible till August”.
Not only are buyers finding it tough to secure loans to buy two-wheelers, even dealers are not finding it easy to get banks to finance their inventory. Of all the automotive segments only the passenger vehicle and tractor segments have bounced back recording a growth in retail volumes during September.
“The uncertainty around demand is forcing banks to believe that dealers will find it tough to repay the working capital requirements we seek from them. This situation won’t get back to normal at least before February next year,” said a Mumbai-based two-wheeler dealer.
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