Wednesday, 20 February, 2008

Have Rs 1,199? You can own a Nano

As Tata Motors gears up to launch the world’s cheapest car Nano later this year, financing companies, including ICICI Bank, SBI Bank, HDFC Bank and Saraswat Bank, are busy charting out attractive finance schemes to woo the buyers.

The Mumbai-based Saraswat Bank is offering a loan of Rs 70,000 at a monthly installment of a mere Rs 1,199 spread comfortably across 84 months or 7 years. The rate of interest is 11-11.5 per cent, which is cheaper than a two wheeler loan.

The Nano has already driven these companies to look beyond the two-wheeler market, which has lately shown a huge slowdown.

Banking officials say that a sizeable segment of the 6.5 million (sales as of last financial year) strong motorcycle buyers are expected to shift to the Nano.

The comparable financing structure for a premium two-wheeler forces you to pay more every month through it is for a shorter period of time.

For instance, a Bajaj Pulsar 220 is sold at Rs 92,675 with an equated monthly installment (EMI) of Rs 2200 for a period of three years.

Banks such as ICICI Bank, India’s largest auto financier, is charging an interest rate of 21-22 per cent on a two-wheeler loan with a down payment of 40 per cent of the total cost and 12.5 per cent on a car loan.

ICICI Bank is looking at unveiling a similar ‘consumer friendly’ financing scheme for the Nano. N R Narayanan, head-vehicle loans, ICICI Bank, said, “We will come out with special schemes for the Nano as huge volumes are involved. We are yet to make a proper financing package as it is still very early. But we will look to grow.”

Concurrently, an executive from the State Bank of India said, “There will be attractive schemes for the Nano once the booking starts in June. We will announce plans well before that date. Interest rates and tenures will be the selling points of our package.”

It goes without saying that the directive from Reserve Bank of India (RBI) will be crucial.

“Although many banks would come out with attractive financing offers, a lot will depend on the market situation and risks involved...but we are talking of huge volumes and many smaller banks will look to grab the opportunity to build a brand through attractive schemes,” said a banking executive.

According to experts, banks will provide packages especially in the non-metro regions where the car will become a hot buy.

The car may not be a good idea for the clogged urban roads of Mumbai, Bangalore or Delhi, but it is likely to become a hot seller in cities such as Kolhapur, Lucknow and Ahmedabad.

"An interest rate of Rs 1,199 can drive many probable two-wheeler buyers to consider the Nano,” said a Mumbai-based auto analyst.

Tata Motors’ own finance subsidiary, Tata Motors Finance, will also finance the car. The company is, however, discreet about its plans.

Tata Motors is looking at producing about 270,000 units annually to begin with and this will be hiked to 350,000 gradually. The car will be up for sale by October this year.

Source: Business Standard