FINDINGS OF NCAER concerning Automobile Sector
NCAER has recently completed a study on the Indian automobile sector. The basic objective of the study was to estimate the demand for automobiles for the period 2002-03 to 2011-12.
The increasing role of auto finance was also scrutinized through a survey of 6,000 automobile users across the country.
Panel regression, which takes into account both time series and cross-section variations, had been used as the econometric tool for demand projection.
A panel data of 16 major states over a period of 5 years ending 1999 was used for estimation of parameters.
Different scenarios, depending on income and other factors, have been projected at all India and regional levels.
Annual growth rate in GDP, under the most likely scenario, was assumed to be 5.5 per cent during 2002-03 and was anticipated to increase gradually to 6.5 per cent during 2011-12.
Thus:
The demand for passenger cars would be the highest in the north-central region followed by west. However, the growth rate for demand would be the highest in the western region.
The demand for passenger cars as well as its growth rate is projected to be the lowest in the eastern region.
The western region tops the list in the demand for motorcycles coupled with the highest growth rate of 16.8 per cent. This is followed by the southern and north-central regions.
In general, the growth rate for the demand for scooter is projected to be abysmally low.
The western region would record the highest growth rate, that of a mere 3.5 per cent.
The demand for MUV would be the highest in the western region with a CAGR of 9.7 per cent. North-central and southern regions would have identical growth rate of 8.6 per cent. However, the demand would be substantially higher in the north-central region.
Institutionalisation of automobile finance has paved the way to sustain a long-term high growth for the industry. Automobile finance took off in India in a large way along with many other changes that followed our liberalisation policy.
Till the early 1990s, auto finance was generally marred by substantial supply constraint. Availing of auto finance was primarily intended for taxation purposes. In the recent past, things have undergone drastic changes.
The East-Asian model of creating purchasing power of customers through financing came in vogue. As a consequence, a large number of new financing agencies have come up over the years.
Auto finance is available both from the banks as well as from the non-banking finance companies (NBFCs). These NBFCs generally have tie-ups with the dealers and manufacturers. These Loan facilities are being used extensively by customers.
The booming automobile sector in India can be attributable to the enhanced affordability due available to financing schemes at a reasonably low rate of interest, both for new as well as old cars, from the financial institutions.
NCAER ‘s study has captured the penetration of institutional auto finance in India through a survey of auto users. The coverage of the survey included:
• Proportion of loan element in the total purchase price and
• Percent of automobile users who have availed of loan from the financial institutions.
The survey results revealed that for all the selected vehicle categories, the loan content exceeded 50 per cent of the purchase price in case of more than two thirds of the loanees.
To capture the shift in the penetration of institutional finance over a period of time, vehicle owners were classified into four groups based on the year of purchase
NCAER has recently completed a study on the Indian automobile sector. The basic objective of the study was to estimate the demand for automobiles for the period 2002-03 to 2011-12.
The increasing role of auto finance was also scrutinized through a survey of 6,000 automobile users across the country.
Panel regression, which takes into account both time series and cross-section variations, had been used as the econometric tool for demand projection.
A panel data of 16 major states over a period of 5 years ending 1999 was used for estimation of parameters.
Different scenarios, depending on income and other factors, have been projected at all India and regional levels.
Annual growth rate in GDP, under the most likely scenario, was assumed to be 5.5 per cent during 2002-03 and was anticipated to increase gradually to 6.5 per cent during 2011-12.
Thus:
The demand for passenger cars would be the highest in the north-central region followed by west. However, the growth rate for demand would be the highest in the western region.
The demand for passenger cars as well as its growth rate is projected to be the lowest in the eastern region.
The western region tops the list in the demand for motorcycles coupled with the highest growth rate of 16.8 per cent. This is followed by the southern and north-central regions.
In general, the growth rate for the demand for scooter is projected to be abysmally low.
The western region would record the highest growth rate, that of a mere 3.5 per cent.
The demand for MUV would be the highest in the western region with a CAGR of 9.7 per cent. North-central and southern regions would have identical growth rate of 8.6 per cent. However, the demand would be substantially higher in the north-central region.
Institutionalisation of automobile finance has paved the way to sustain a long-term high growth for the industry. Automobile finance took off in India in a large way along with many other changes that followed our liberalisation policy.
Till the early 1990s, auto finance was generally marred by substantial supply constraint. Availing of auto finance was primarily intended for taxation purposes. In the recent past, things have undergone drastic changes.
The East-Asian model of creating purchasing power of customers through financing came in vogue. As a consequence, a large number of new financing agencies have come up over the years.
Auto finance is available both from the banks as well as from the non-banking finance companies (NBFCs). These NBFCs generally have tie-ups with the dealers and manufacturers. These Loan facilities are being used extensively by customers.
The booming automobile sector in India can be attributable to the enhanced affordability due available to financing schemes at a reasonably low rate of interest, both for new as well as old cars, from the financial institutions.
NCAER ‘s study has captured the penetration of institutional auto finance in India through a survey of auto users. The coverage of the survey included:
• Proportion of loan element in the total purchase price and
• Percent of automobile users who have availed of loan from the financial institutions.
The survey results revealed that for all the selected vehicle categories, the loan content exceeded 50 per cent of the purchase price in case of more than two thirds of the loanees.
To capture the shift in the penetration of institutional finance over a period of time, vehicle owners were classified into four groups based on the year of purchase