Consumer Automotive Financial Services in India

Jul, 2014   |   50  Pages   |   Finaccord Ltd   |   Format : PDF + Excel database

Consumer Automotive Financial Services in India investigates the market for automotive financial services linked to sales of new and used passenger cars in India. In addition to analysing the market for finance and leasing services, the study also covers creditor insurance, motor insurance and road assistance, and demonstrates the extent to which a market exists for extended warranties and GAP insurance. Using survey results for average take-up rates for finance and leasing propositions at the point of sale, data for the size and growth of the automotive finance and leasing market for consumers in India is provided in terms of gross advances and assets leased for 2007 to 2011 with splits between finance for new and used cars and between finance organised through dealerships at the point of sale and directly with banks or other lending institutions. Moreover, also by means of data for average take-up rates, the markets for creditor insurance, motor insurance, road assistance, extended warranties and GAP insurance are sized in terms of gross written premiums and other revenues sold through the automotive trade (i.e. via dealers and manufacturers) in 2011. These are broken down between new and used cars and between new contracts sold during 2011 and in-force business sold in previous years but still being renewed in 2011. The report draws on a survey of over 90 leading car dealerships as well as an analysis of the approach to consumer auto

0.0 EXECUTIVE SUMMARY ..........1

1.0 INTRODUCTION ..........3
What is this report about?3
The focus of the report is on financial services related to the sale of passenger cars to individuals3
Rationale.3
The provision of financial services is essential to support both car sales and profitability...3
This report offers a new and detailed analysis of the subject in India based on primary research ..3
Methodology........3
Survey of dealers and manufacturers....3
Market data ......4
Computation of market data is based on a complex set of assumptions and variables..4
in order to provide market segmentations in unrivalled detail....5
External sources ...........6
Definitions ............6
Finance and leasing products ...6
Insurance, warranty and assistance products....7
Operating models .........7
Tied and non-tied providers.......8
Abbreviations ...8
Exchange rate..8
PartnerBASE and market data annexe ....8
Finaccord 9

2.0 MARKET ANALYSIS.10
Introduction........10
Passenger vehicle data .11
Sales of new cars in India have exceeded 2.5 million for the past four years.......11
...but the growth of used car sales has been both more rapid and more consistent..........11
Maruti Suzuki occupies a dominant position in the market for new passenger vehicles...12
Consumer automotive finance and leasing market..........14
Market size and growth ...........14
Point-of-sale finance for new cars dominates the automotive finance market......14
... and has grown quite rapidly since 2009 as a result of increased sales and inflation.....15
Types of finance and leasing product..17
The Indian point-of-sale finance market is dominated by simple loans....17
Consumer automotive insurance, warranty and assistance markets .......18
Market sizes ...18
In total, the automotive trade is likely to have sold contracts worth well over INR 100 billion in 2013 ........18
Survey of automotive dealers and manufacturer brands - overview.........21
Introduction.....21
Provision of consumer automotive financial services ...21
Dealers largely concentrate on four core automotive financial services...21
Some additional manufacturer brands could introduce finance and leasing services .......21
Number and nature of dealer schemes............23
Dealers typically work with about four tied and four non-tied finance and leasing providers..........23
Types of creditor insurance policy sold by dealers .......25
Creditor insurance sold with cars covers death and permanent disability only.....25
Types of motor insurance policy sold by dealers..........26
Dealers only market comprehensive insurance policies.26
Sources of road assistance distributed by dealers .......27
Road assistance is rarely bundled with products other than factory and extended warranties......27
Consumer uptake of automotive financial services through dealers .....28
Around nine out of ten buyers of new cars in India acquire motor insurance at the point of sale ..28
Take-up rates are also significant for both creditor insurance and extended warranties...28
Survey of automotive dealers and manufacturer brands - partnerships...30
Introduction.....30
Finance and leasing....31
In a highly fragmented market, only one finance provider claims more than 10% of non-tied partnerships............31
...with 40 competitors sharing the rest of these partnerships between them ........31
Kotak Mahindra Prime generated a pre-tax profit of INR 7.52 billion for the year ending March 2014.......31
Toyota Financial Services India is the leading captive, ahead of Mahindra & Mahindra Financial Services...........33
...while HDFC Bank, ICICI Bank and State Bank of India are the leading external partners..........33
On a combined analysis, HDFC Bank claims the highest implied share of new business35
...but with less than 10% of the weighted share of new registrations .......35
Creditor insurance.......36
Captive finance providers rarely offer this, leaving Max Life as the only insurer with a direct relationship .36
Motor insurance ..........38
Around two thirds of dealers use non-tied partners for motor insurance..38
...of which there are nearly 20 competing underwriters...38
Manufacturer brands' partnerships for motor insurance are shared between 15 underwriters......40
..six of which collaborate with Maruti Suzuki.......40
A combined analysis points to ICICI Lombard and Bajaj Allianz as the leading point-of-sale providers.....42
Extended warranties...43
Extended warranty provision by dealers is almost always organised through tied providers.....43
...and two insurers have won mandates with manufacturer brands as external providers44
Road assistance .........46
Road assistance is available in one form or another from the vast majority of car dealers in India............46
Allianz Global Assistance and MyTVS are likely to be the leading independent providers............47
Prepaid service contracts ........49
Dealers offering prepaid service contracts are usually reliant on tied products 49
...and the schemes of manufacturer brands are all reportedly run on an in-house basis..49

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