Fiat, Tata ink pact to form car loan company by April
Dec 25 2012 , Mumbai
“We hope to launch Fiat Financial Services India by April 2013. Tata Capital will be making the required investments on our behalf for this entity that will offer financing of Fiat vehicles for customers and offer our supply-chain customised financial solutions,” Enrico Atanasio managing director of Fiat Group Automobiles India told Financial Chronicle.
Tata Capital, a systemically important NBFC, is a subsidiary of the group’s principal holding company Tata Sons and the lead financial services company of the group.
At present, Tata Motors Finance provides financing for Fiat cars in India apart from Tata Motors’ own range of cars and trucks. According to Tata Motors Finance officials, the company finances between a fifth and a fourth of the total volume of Fiat basdged vehicles sold in India.
Tata Capital on the other hand finances non-Tata and non-Fiat branded vehicles. In May, in order to further develop the Fiat brand in India, management control of Fiat’s commercial and distribution activities were handed over to a separate Fiat Group-owned company in India by Tata Motors. Tata Motors, India’s largest truck manufacturer, and Fiat, however, retain their joint venture to manufacture Fiat cars and power trains in India at Ranjangaon in Maharashtra.
The Tatas also have a collaborative arrangement with Fiat in global markets with Tata group owned Jaguar Land Rover tying up with FGA Capital, a joint venture with Fiat Auto and Credit Agricole for UK and European consumer finance. Recently, a number of auto firms in India have been keen on setting up a captive finance arm to push sales of their vehicles as the predominant portion of automobiles sold in India are powered by car loans. By setting up their own arms, the auto firms hope to push sales of their vehicles as the captive financiers would offer more customised financing terms for car buyers.
Recently Volkswagen Finance completed a year of operations in India. It focuses exclusively on financing Volkswagen group automobiles (Volkswagen, Audi and Skoda brands) in India. During the first full year of operations in financial year 2011-2012, it had a net loss of Rs 36.56 crore due to high operating expenditure. Mercedes and BMW too, have set up financial services arms in India to boost sales of their high-end cars. In many cases, these captive financiers offer extremely low interest rate financing. These arms also help in providing finance for sale of used cars of these brands that have been reconditioned and certified by manufacturers.