Car loans rates set to drop further to 11%  ( December '13,2002, ET)

Official rack rates (the rates mentioned in the brochures) on car loans are expected to drop further to 11% from 12-13%, in line with the overall softening interest rate regime.

Industry players feel that a rise in the volume of cars financed this year will offset the drop in margins. According to industry estimates, total car finance volumes recorded a 6-7% growth in ‘02.

Organised players have eaten into the shares of the unorganised smaller players, claiming 70% of the total volumes financed this year as against 50% in ‘01. Aggressive new entrants like ABN Amro, ICICI and HDFC, who invested in expanding their reach in the semi-urban markets, have gained more volumes. For the automobile industry, semi urban and rural markets accounted for 52% of the demand in ‘01 and this is expected to exceed 63% by ‘03.

Both car financiers and manufacturers have moved in tandem to make inroads into the market.

The fact that Maruti Udyog, General Motors, Ford and Hyundai Motor opened up dealerships at upcountry locations has also helped the Rs 8,000-crore car finance market push volumes.

"It has been a fairly good year for the industry. A whole lot of manufacturer support, discounts, competitive pricing, finance schemes and aggressive inroads into smaller towns and cities helped growth this year," said PN Vasudevan, business head (vehicle finance) of Cholamandalam Finance. "Organised players have eaten into the shares of the smaller players like the co-operative banks and regional players. The share of the unorganised players has dropped to less than 45% this year. Overall, the market has grown in width and depth."