Car finance schemes evolve

MANDOVI MOTORS PVT. LTD.
EXECUTIVE SUMMARY
Car finance schemes have evolved with changing needs and market solutions. Aggressive marketing, packaging, easy eligibility, fast turnaround of applications, have all contributed to making car finance a preferred option to own funds. Not too many years back, for the Indian consumer a car meant either the sturdy Ambassador or the Fiat. Same was the case with other vehicles the collaboration of the Japanese car giants with India to produce the popular Maruti Suzuki brought in a flood of models. Next, it was the turn of liberalization to affect a drastic turnaround in the market monopolized by Maruti. The auto-financing sector is sub divided into three segments i.e. Commercial vehicle financing, Two wheeler financing and Car financing. In India the concept of car finance was introduced in 1984- 85. At present, 75- 80 % of the vehicles brought in the country are bought through various vehicle-financing schemes. Car finance is popular because the financier provides ready delivery of the vehicle to the customer. This enables the customer to claim depreciation and cut out of the waiting period . Current market Scenario: The current sluggish market conditions, coupled with the lowering of interest rates, have made the car finance market extremely competitive. Finance companies, dealers and manufacturers are wooing buyers with "special offers", discounts, "0% finance", low interest rates etc.
MANDOVI MOTORS PVT. LTD. The major players in the car finance business are the Foreign Banks, Indian Banks, NBFCs and FIs. The car finance is a large industry today with disbursals of approx. Rs. 80 bn. With increasing number of players, the car loans market is intensely competitive on pricing. With no waiting periods and truly buyers market, the industry today is wooing customers with transparent transactions, lower interest rates and better service standards. Opportunity In India there is a large number of customer exist in mid economic group which is growing at the rate of 40% annually as a result there luxuries needs are also growing by Increase in their disposable incomes, wider choice in selecting car models and lower interest rates on loans are expected to drive car sales up to 9.5 per cent at a compounded annual rate in India by the year 2006-07, according to a report. Car sales are expected to touch 9.09 lakh units in the next five years,
Clearly, it seems, that finance companies will not hold anything back when it comes to value added schemes. Here the customer is the king and the race is on to woo him/her
Prices of cars having increased in recent months (due to Euro compliance and rise in input costs) and are expected to go up further due to a rise in sales tax rates. This will provide further fillip to finance schemes and may be in the not so distant future, car buying could become more exciting and affordable.
In today's competitive world, the consumer is King. Two individuals availing a finance scheme from the same source can get different deals. So negotiations can go a long way to get you better deals and the maximum bang for your buck.
INTRODUCTION
Not too many years back, for the Indian consumer a car meant either the sturdy Ambassador or the Fiat. Same was the case with other vehicles. The collaboration of the Japanese car giants with India to produce the popular Maruti Suzuki brought in a flood of models. Next, it was the turn of liberalization to effect a drastic turnaround in the market monopolized by Maruti. Collaborations with international giants began to occur, and the Indian aficionado did not have to look beyond the shores for gratification.
The present scenario is a highly changed one. International giants are vying with one other to launch their models.
Car market to grow at 9.5%
MANDOVI MOTORS PVT. LTD. INCREASE in disposable incomes, wider choice in selecting car models and lower interest rates on loans are expected to drive car sales up to 9.5 per cent at a compounded annual rate in India by the year 2006-07, according to a report. Car sales are expected to touch 9.09 lakh units in the next five years. Research company Cris Infac, in its report, also expects lowering excise duties to be one of the reasons for the upturn. Passenger car sales growth has already touched 9.8 per cent in the first nine months of this fiscal, thanks to the higher discounts offered to the customers. According to the report, highest sales - of 12 per cent - are expected in the B segment, or the higher lifestyle cars with affordable prices, which will offer the widest variety of models. Car makers will continue to "aggressively launch" new models in this segment. Sales of luxury cars or the A segment is expected to grow at a marginal rate of 2.7 per cent, with most sales expected in the smaller towns. The C, D and E segments are expected to grow at a high pace but will continue to form a small portion of total car sales, according to the report. Availability of cheap finance will lead to an increase in sales of utility vehicles which are likely to grow at 4.5 per cent, the report says. The report predicts that competition will not only lead to several new models being introduced, but also mean higher ad spends by carmakers. This will prevent car companies from fully passing on increases in cost of production to the customers and will put pressure on margins, As a result, companies will exploit new markets in the semiurban and rural areas by opening new dealerships. The report believes that favorable Government regulations can encourage demand in passenger cars and utility vehicles. Currently, duties have a cascading effect, pushing car prices higher by 60 per cent. The new auto policy 2004 augurs well for the automobile industry as it has done away with export commitments and indigenization clauses as well as allowed
MANDOVI MOTORS PVT. LTD. approval of 100 per cent foreign equity in the Indian automobile industry, according to the report.
Indian Automobile Sector

Did you know India is the 2nd largest two wheeler manufacturer in the world. 2" largest tractor manufacturer in the world. Largest commercial manufacturer in the world. 3r largest car market in Asia, surpassing China in the process. Automobile Industry in India is still in its infancy but growing rapidly. The opportunities in the automobile industry in India are attracting big names with big purse and they are investing vigorously in infrastructure, design and development, and marketing. Automobile industry in India is today poised for the big leap. Automobile industry Contributes 17% of the total indirect taxes collected by the exchequer & is a driver of product and process technologies, and has become a excellent manufacturing base for global players, because of its High machine tool capabilities Extremely capable component industry Most of the raw material locally produced Low cost manufacturing base Highly skilled manpower So that Major players have started sourcing components from India, such as Fiat plans to source US $200 mn. worth of components from India per annum. Mercedes Benz (Daimler Chrysler) has set up 7 component JVs in India for global sourcing of parts.
MANDOVI MOTORS PVT. LTD. Cummins, USA is already sourcing Engine parts from India for Cummins Global Operations. Multi National such as DELPHI and VISTEON have started exporting components made in India to their various other plants around the worldInvesting further to make India as a manufacturing base.
Indian Automobile Industry Performance

Key Players Investment Output Exports Employment - 402 - US $ 2.3 billion - US $4 billion - US $ 417 million - 2,50,000 persons
DESIGN OF STUDY
Title of the Project Recent trends in Car Finance" Statement Of The Problem The opening of the economy has brought car buyers a plethora of models to choose from. Having decided the car to buy, buyers also have to decide whether to fund it from their own resources or through car finance. Car finance schemes have evolved with changing needs and market solutions. Aggressive marketing, packaging, easy eligibility, fast turnaround of applications, have all contributed to making car finance a preferred option to own funds. However, a buyer needs to understand some ground rules to shift through all the options and find one that suits him best. Hence, this study was carried out. Need For The Study Writing out a cheque for the value of the car is the easiest solution. But that is the preserve of a select few and for most of us, availing of a finance scheme to purchase the car is the best option. Even for those who are able to make a full payment should check a financing option before taking the final decision. The current sluggish market conditions, coupled with the lowering of interest rates, have made the car finance market extremely competitive. Finance companies, dealers and manufacturers are wooing buyers with "special offers", discounts, "0% finance", low interest rates etc. Once a buyer has decided to avail a finance scheme for his car, the next step is to select the scheme that suits him the best. Our newspaper is foil of tempting offers from a host of finance companies each luring us with a basket of freebies. On top of that are claims and counterclaims about their interest rates and down payments. So how does one decide which is the best finance option for him? To select the best option one need to first familiarize himself with the mechanics of
MANDOVI MOTORS PVT. LTD. this market after which, he will be in a better position to make up his mind. Hence the need for this study. Objectives of the Study The following objectives were set for the study: Study of the car finance market in terms of its characteristics, factors affecting the market and trends visible in this market. To study some car financing companies, for their differentiating strategies, financing schemes offered and services provided. To study and compare the various schemes offered to the consumer for Maruti cars by car financing companies, which have tied up with Marurti Udyog Ltd., To analyze the performance of these companies vis--vis Mandovi Motors Pvt. Ltd. in terms of the number of Maruti cars financed by them during the months September to December of financial year 2004-05. Scope of the Study The scope of the study " Recent trends in car finance" includes: Visit to Mandovi Motors Pvt. Ltd., and survey conducted to measure the performance of the various car-financing companies in terms of their offerings. Information was collected with the help of a Questionnaire from the car financing companies on different models of Maruti. Study and compare the various schemes offered to the consumer in availing car finance. Period of Study The study was carried out during January 2005- February 2005. Data Collection Primary data was collected from car financing companies and Mandovi Motors through questionnaires and personal interviews. Secondary data was
MANDOVI MOTORS PVT. LTD. collected through various published sources like websites, magazines and company brouchers. Limitations of the Study The study was conducted only in Bangalore city. Performance of car financing companies have been compared with respect to Maruti cars only, Data given by the companies have been relied upon. The study was conducted in a restricted time frame.
INDUSTRY PROFILE
The automobile industry saw a boom in the liberalization period. The buoyancy in the auto sector was primarily due to a change in government policies, increase in purchasing power, increase in life style, availability of car finance etc. Though the market has boomed, the individual players are likely to see setback in the near future due to intense competition. Several joint ventures have been signed and several are expected in the near future. The automobile sales figures of December 2004 indicate continued buoyancy in motorcycle and passenger car sales. However, Utility vehicles sales dipped by a sharp 25% during the month. Commercial vehicles sales also registered a decline, with the de-growth being sharper in the Medium and Heavy vehicle segment. Two Wheelers Two wheelers sales grew by 27.6% in December 2004 to 3,63,206 vehicles. This growth has solely been driven by a robust 54.4% growth in motorcycle sales, 2,65,733 motorcycles were sold during the month. Cumulative motorcycle sales in FY02 till date has been 2.6mn units, accounting for 68% of all two wheelers sold in the country. Scooter sales registered an 8.1% decline in December to 61444 units. Cumulative scooter sales during April-December have been 7,89,399 vehicles, 1.2% lower than that sold during the corresponding period in FY01. The decline in moped sales has been even sharper. Moped sales in December were down 21.3% to 36,029 units. Cumulative moped sales in FY02 till date have been 4,28,983 units, 27.9% lower than the previous year. Three Wheelers Three wheelers sales also have registered a buoyant 33% growth in December at 16,898 vehicles. Cumulative sales in the first 09 months of the year have risen to 1, 80,875 units, a 6.7% increase over the previous year.
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MANDOVI MOTORS PVT. LTD. Passengers Cars Passengers cars sales registered at 16.5% increase to 54,229 vehicles in December 2002 Cumulative car sales in the first 09 months of FY02 have almost reached previous years level aided by the revival in sales volumes witnessed during the last few months. April-December FY02 passenger car sales stood at 5,04,271 vehicles (504841 vehicles in FY02)
Vehicles Sales (nos.) Cars MUV LCV M$HCV Scooters Motor Cycles Mopeds 3-Wheelers Tractors Total 2004-2005 5,90,673 1,26,943 62,916 87,497 9,01,886 21,56,014 6,87,635 1,98,163 2,35,713 50,47,440 2003-2004 6,38,632 1,23,472 60,239 1,11,326 12,53,880 17,96,783 7,24,395 2,05,265 2,51,601 51,65,593 2002-2003 4,09,624 1,11,703 56,344 83,645 13,25,860 13,95,650 6,79,526 2,10,220 2,53,188 45,25,760 2001-2002 4,17,736 1,33,629 62,925 93,628 12,62,293 11,32,533 6,48,843 2,33,733 2,49,794 42,35,114
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Vehicles Sales (in '00000)

60 50 40 30 20 10 0 50.47 51.65 45.25 42.35
2004-03
2003-02
2002-01
2001-00
Vehicle Sales
Passenger Car Sales
CARS SALES Maruti Hyundai Telco Fiat India Hindustan motors Ford India Honda siel General motors Daimler chrysler
DEC-04 30,905 8,652 6,524 3,060 1,756 1,564 906 798 64
DEC-05 29,562 6,090 3,666 601 2,099 1,005 653 693 41
% 4.5 42.1 78.0 409.2 -16.3 55.6 38.7 15.2 56.1
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MANDOVI MOTORS PVT. LTD. All the big players - Maruti, Hyundai and Telco - who together account for 85% of the market have recorded good volume growth in February. Maruti Udyog posted a 4.5 % rise in its sales at 30,905 units; Hyundai Motor Indian sold 8,652 units registering an increase of 42% and sales of Telco increased by 78% to 6,524 units. Hindustan Motors was the only company to have registered a decline in sales. Its sales declined by 16.3% to 1,756 cars during the month. Fiat India recovered a five-fold increase in volumes aided by its fast moving Palio. Ford India, Honda Siel and Daimler Chrysler all recorded strong double-digit volume growth.
Multi-Utility-Vehicles Multi-utility-vehicles (MUV) sales fell by 25.3 % at 9,518 units against 12,750 units in December 2004. Cumulative MUV sales in the first 09 months of FY02 has registered a 0.5% decline at 1,07,199 vehicles. Commercial Vehicles Commercial vehicle sales in December dipped by 7.9% at 12,372 units as compared to 13,674 units in the corresponding period last year. The fall has been much sharper in the Medium & Heavy Commercial vehicle segment, which registered a 12.9% fall from 8,660 vehicles. LCV sales declined by 3.5% from 5,004 vehicles to 4,829 vehicles. Cumulative commercial vehicle sales during AprilDecember 2004 has been 1,13,609 vehicles a decline of 3.3% over the corresponding previous period. All the big players - Maruti, Hyundai and Telco - who together account for 85% of the market have recorded good volume growth in February. Maruti Udyog posted a 4.5 % rise in its sales at 30,905 units; Hyundai Motor Indian sold 8,652 units registering an increase of 42% and sales of Telco increased by 78% to 6,524 units. Hindustan Motors was the only company to have registered a decline in sales. Its sales declined by 16.3% to 1,756 cars during the month. Fiat India recovered a five-fold increase in volumes aided by its fast moving Palio. Ford India, Honda Siel and Daimler Chrysler all recorded strong double-digit volume growth
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The Passenger Car Market

History The car manufacturing industry in India started as a much regulated industry with Government of India (GOI) shutting down all foreign assembly plants in the country in 1954 with the objective of developing the indigenous automobile industry. This resulted in limited choice to the consumer via Ambassador (from Hindustan Motors) and Fiat (from Premier Automobiles Limited) for over three decades. It was only in 1985 that Maruti Udyog Limited (a joint venture between GOI and Suzuki Motors Limited of Japan) introduced Maruti 800 that changed the face of the car industry in India. The car was launched as a people's car with a price tag of INR 40,000 in 1985. The sales of the model increased form 1200 units at launch to over 189,000 units in FY 2001. The deli censing of the auto industry in 1993 opened the gates to a virtual flood of international automakers into the country. Daewoo Motors was the first to enter followed by others like GM, Ford, Honda, Mercedes, Fiat, Hyundai, Mitsubishi and Toyota. One of the large industrial houses of India (TATA) also aggressively entered the domestic car market with the small car Indica. The car sales stood at 6, 00,000 cars for the FY 2001. Maruti continues to dominate the car sales market with 55% market share though it is steadily losing the market share to new entrants like Hyundai and Daewoo. The industry has witnessed a CAGR of about 17% from FY93 to FY 01. The flood of new entrants into the car industry as a result of liberalization has led to a complete transformation of the sector. The car segment is flooded with new models from new and existing players, a visible shift from a constrained supply position to a surplus. The world automobile leaders have evinced keen interest in India and are making an entry through joint ventures and technology cooperation agreements. The setting up of joint ventures has led to enhance capacity creation, particularly in the passenger car segment.
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MANDOVI MOTORS PVT. LTD. Evolution Initial years Cars regarded as luxuries. Manufacturing was licensed, capacity expansion restricted. Import of cars was restricted to State Trading Corporation and foreign diplomats. High customs duty. Steep excise duties and sales taxes. Market dominated by just two players-Premier Automobile Limited and Hindustan Motors Limited 1980's Entry of Maruti Udyog Limited- better product at lower price; enjoyed government support. Sellers market. Long waiting periods. Limited choice.
Restriction on capacities. License requirements. High import duties. Auto finance became available but was limited to a few players. MUL captured a market share; PAL and HM were able to maintain volumes but their market share fell drastically. 1990's Cars perceived as necessities. Still a sellers market. Long waiting periods continue.
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Development of the mid price and luxury segments. Increase in competition with the entry of foreign manufactures especially after the mid 90's.
Superior models and more choice. Auto finance booms- more players (Foreign banks and NBFC's); better schemes.
Deli censing in 1993. Removal of capacity restrictions. Decrease in the customs and excise duties.
2000's Buyer's market. Drop in waiting periods. Market segmentation to change from being price based to being size based.
Auto Financing Sector The auto-financing sector is sub divided into three segments i.e. commercial vehicle financing, two wheeler financing and car financing. In India the concept of car finance was introduced in 1984- 85. At present, 75- 80 % of the vehicles brought in the country are bought through various vehiclefinancing schemes. In the 1990's especially more finance companies entered the business mainly due to the risk return imbalance. The interest rates charged are high. However, as the loans are disbursed over a large number of individuals the overall risk decreases. There was a spurt in finance because of the stable returns and the protection that the car finance enjoyed. On one hand, the registration makes clear the identity of the financier; on the other hand, there is a thriving second hand market for cars.
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MANDOVI MOTORS PVT. LTD. Car finance is popular because the financier provides ready delivery of the vehicle to the customer. This enables the customer to claim depreciation and cut out of the waiting period. The holding cost paid to the financier for ready delivery is normally lower than the premium prevalent in the market for such models. Simple documentation and easy procedures like mere checking of proof of the residence and income tax returns before the sanctioning of the loan has attracted many to auto financing. Many of the banks including the private sector and the foreign banks do the financing through the dealer's DSA's or DSA's or through sales person. Direct sales associates, DSA's as they are Popularly known as a key resource for any organization that want to expand it's selling and marketing function indirectly. They are classically defined as an extension of the bank sales and marketing department. The ideology behind hiring a DSA is three fold: Marketing a bank product through only the bank department directly severely limits the reach of the bank. It allows the bank to avoid the cost ineffective option of a large sales staff on it's sales. DSA's operate on an incentive structure that revolves on the 'Get more Make more' principle which to say the least is a more effective drives for business generation than a permanent employee on the roles of the bank. This is especially true in the case of a country like India given, it's large distance and dispersed prosperity pattern. They fill this need gap. They are small business run by professionals in finance and / or direct selling which comes with their own office and infrastructure. They employ graduates/undergraduates on a fixed salary plus incentive structure line with the principle of 'get more make more'. They are normally independent company's having a network of sales personnel who go out on the field and source application for the various loans of the bank. The objective of appointing DSA's is to bring in large volume of new sales.
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MANDOVI MOTORS PVT. LTD. They also provide wider coverage' flexibility to increase or decrease sales and efforts to suit demands. They can be adapted for specific campaign requirements.
Automobile Finance in India

The availability of finance at lower interest rates, have made car purchase an affordable option for even young executives. Financing schemes varies from Margin Money Scheme , Installment in advance scheme, stepped schemes and as varying as balloon schemes, No income schemes etc. The new schemes available in the market has made it possible for salaried individual to realize their aspirations to own a Car in India, early in Life. Businessmen and professionals can treat the interest amount as a business expense and avail tax deductions against the depreciation of the Car. Companies can also acquire cars for eligible employees without affecting cash flows. The interest amount can be claimed as business expense.
INDIAN CAR LOANS MARKETS The major players in the car finance business are the Foreign Banks, Indian Banks, NBFCs and FIs. The car finance is a large industry today with disbursals of approx. Rs. 80 bn. Citibank was the first organized player to enter the Indian Car finance market in Aug 86 and since then has been among the top 3 financiers in the business. Car loan is one of the most widely distributed retail product in India today. Increasingly, the financiers are accessing the smaller cities to offer this product. GE today operates in India out of 88 locations. ICICI, which launched the car loan product in April 99, currently operates out of 26 locations in North India alone. The product is distributed primarily through Direct Sales Associates (DSA) and Dealerships. A DSA is an external agency empanelled by the financier who sells this product through the network of Sales executives or agents. Car dealerships
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MANDOVI MOTORS PVT. LTD. are increasingly getting into the financing business and are referred to as manufacturer dealers. A non-manufacturer dealer, however, is only a intermediary for financing the car. The delivery is still done through a car dealership. With the changing face of the car market, the loan market has also witnessed significant changes. Increased competition has resulted in decreasing interest rates and charges, much to the benefit of the consumer. Processing fee, which used to be a norm three years back, no longer exists.. In the past, products for financing booking amount was popular. Also, there were large premiums on select cars. With increased production capacities, the new car models getting launched have been 'off the shelf models i.e. with no waiting period, thereby reducing the popularity of such a product. Loan is increasingly becoming acceptable as an option for purchase of car in India. With the increased purchasing power and more models to choose from, car is no longer viewed as a luxury. With increasing number of players, the car loans market is intensely competitive on pricing. With no waiting periods and truly buyers market, the industry today is wooing customers with transparent transactions, lower interest rates and better service standards. Since the car loan has been in existence for almost 15 years in India, the financiers have built up a significant database of customers. This has led to a better understanding of the customer profile and hence the delinquencies. Consequently, the risk appetite of the financiers has increased and the credit criteria adopted have become softer. Another significant development is the increased focus of the financiers on customer service, which till a year back was almost non existent in this kind of business. Almost all financiers have made significant investments in technology to service the customer better since this is going to be a key differentiator in future for survival in assets business, particularly car loans.
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Equated Monthly Installments (EMI) Cost of borrowing is the amount, which a borrower has to repay in excess of the amount he receives, is a major determining factor in any borrowing decision. This cost of borrowing is generally expressed in terms of rate of interest and other changes. However, the real interest cost to the borrower depends upon not only the rate of interest but also the method of calculation of interest - whether simple interest or compound interest, if interest is compounded, periodicity of compounding (monthly, quarterly, half yearly or yearly). Even when the rate of interest is compounded, the real borrowing cost depends upon the method or manner in which the interest is calculated. EMI is the amount consisting of the principal and the interest payable on a monthly basis where by the sum of all the EMIs would be equal to the entire repayment of the borrowing and the interest due on the borrowings. The interest is calculated in advance presuming that the installments are paid as per the prescribed repayment schedule. The interest is added to the principal and the repayment schedule is also fixed so as to ensure that the amount repaid on specified installments is kept uniform. It is used by most of the financing finance companies. Basic factors considered in determining EMI: * Principal Amount * Rate of Interest * Repayment Schedule
Advantages of Equated Monthly Installments 1. Interest is distributed over loan period
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In the initial period of a loan, where principles of EMI are not applied, interest burden will be heavy and keeps on reducing subsequently as and when repayments are received. In EMI, the interest burden is distributed over a period of time. Because of this, the demand during the initial period of the loan will be less. Normally, over dues occur during the early part of the loan on account of higher interest burden, the quantum of the over use may be reduced considerably by fixing equated monthly installments. 2. Elimination of interest arrears It may so happen that the borrower pays the installments toward principal promptly but the interest is kept in arrears. The reason probably, is that the borrower is made known only the quantum of principal and not the quantum of interest. Hence, the interest portion may remain unpaid. By fixing equated installments the borrower is made aware of the exact amount of repayment. It is therefore easy to advise the borrowers, which takes care both the installment and interest. 3. Calculation of Demand, Collection and Balance Arriving at the Demand, Collection and Balance position of an account is simpler in case of Equated Monthly Installment method as compared to the normal method.
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INTEREST RATE CHART

MARGIN MONEY SCHEME EMI in Arrears - (per lakh basis) Interest Rate% 11.00% 11.25% 11.50% 11.75% 12.00% 12.25% 12.50% 12.75% 13.00% 13.25% 13.50% 13.75% 14.00% 14.25% 14.50% 14.75% 15.00% Tenure 12 Mths 8838 8849 8862 8873 8885 8897 8908 8920 8932 8943 8955 8967 8979 8990 9002 9014 9026 24Mths 4661 4672 4684 4696 4707 4719 4731 4742 4754 4766 4778 4789 4801 4813 4825 4837 4849 36Mths 3274 3286 3298 3310 3321 3333 3345 3358 3369 3381 3394 3406 3418 3430 3442 3454 3467 48Mths 2585 2597 2609 2621 2633 2646 2658 2670 2683 2695 2708 2720 2733 2745 2758 2770 2783 60Mths 2174 2187 2199 2212 2224 2237 2250 2263 2275 2288 2301 2134 2327 2340 2353 2366 2379 72Mths 1903 1916 1929 1942 1955 1968 1981 1994 2007 2021 2034 2047 2061 2074 2087 2101 2114 84Mths 1712 1725 1739 1752 1765 1779 1792 1806 1819 1833 1846 1860 1874 1888 1902 1916 1930
Example: At an interest rate of 12% and for a tenure of 36 months, the EMI works our to Rs. 3,321 for a loan of Rs. 1,00,000
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MANDOVI MOTORS PVT. LTD. Key Players In Car Finance Market Maruti Country Wide
Citicorp Maruti HDFC BANK ICICI Bank ABN Amro Kotak Mahindra Standard Chartered Bank Tata Finance Ltd. Sundaram Finance Citibank Hong Kong Bank Cholamandlam finance Associates Finance
Nationalized Banks
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COMPANY PROFILE
Maruti Udyog Limited The Dawn Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. Suzuki Motor Company was chosen from seven prospective partners worldwide. This was due not only to their undisputed leadership in small cars but also to their commitment to actively bring to MUL contemporary technology and Japanese management practices (which had catapulted Japan over USA to the status of the top auto manufacturing country in the world).
A license and a Joint Venture agreement was signed between Govt. of India and Suzuki Motor Company (now Suzuki Motor Corporation of Japan) in Oct 1982. The objectives of MUL then were: Modernization of the Indian Automobile Industry. Production of fuel-efficient vehicles to conserve scarce resources. Production of large number of motor vehicles which was necessary for economic growth. The Revolution Maruti created history by going into production in a record of 13 months. On 14 December 1983, the then Prime Minister of India, Mrs. Indira Gandhi, handed over the keys of the first car to Mr. Harpal Singh of Delhi.
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MANDOVI MOTORS PVT. LTD. Volume targets were routinely exceeded, and in March 1994, it became the first Indian company to produce over one million vehicles, a landmark yet to be achieved by any other car company in India. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 3.5 million vehicles by December 2002. Maruti is one of the most successful automobile joint ventures, and has made profits every year since inception till 2000-01. In 2000- 01, although it generated operating profits on an income of Rs 92.5 billion, high depreciation on new model launches resulted in a book loss. They are on track for profits in 2002-03, with a profit of Rs300 million in the first half. In this period, sales have increased by 5.3%. It revolutionized the way Indians looked at cars. "No other car company completely there being dominates 11 its home market" now (The Economist). companies so Despite
in the passenger car market, Maruti
holds about 60% of the total market share. MUL is also the first and only car company in the world to lead its home market in terms of both market share and in the ID Power Customer Satisfaction study (JD Power Asia Pacific 2001 India Customer Satisfaction studies).
Our Ethos Our employees are our greatest strength and asset. It is this underlying philosophy that has moulded our workforce into a team with common goals and objectives. Our Employee-Management relationship is therefore characterized by: Participative Management. Teamwork & Kaizen. Communication and information sharing. Open office culture for easy accessibility
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MANDOVI MOTORS PVT. LTD. To implement this philosophy, we have taken several measures like a flat organizational structure. There are only three levels of responsibilities ranging from the Board Of Directors, Division Heads to Department Heads. Other visible features of this philosophy are an open office, common uniforms (at all levels), and a common canteen for all. This structure ensures better communication and speedy decision-making processes. It also creates an environment that builds trust, transparency and a sense of belonging amongst employees Shareholding and Directors An Act of Parliament set up Maruti Udyog Limited as a deemed public limited company in 1981. MUL was classified in the Public Sector as long as the equity of Government of India remained over 51%. A License and Joint Venture Agreement was signed in 1982, with Suzuki Motor Corporation (SMC) acquiring 26% of the equity. SMC increased its equity to 40% in 1989. In 1992, Maruti ceased to be a government company, as SMC's equity holding went up to 50%.
In 2002, SMC's share went up to 54.2%, making MUL a subsidiary of SMC. The Govt. of India holds 46.6%, and an employees' trust holds the balance 0.2%.
MUL is a Board-managed company. The directors on the Board are: Mr. Shinzo Nakanishi, Chairman Mr. Jagdish Khattar, Managing Director
Mr Yuichi Nakamura, Joint Managing Director Mr Shinichi Takeuchi, Director (Production) Mr Kinji Saito, Director (Marketing and Sales) Mr Motohiro Atsumi, Director (Finance) Mr Hirofumi Nagao
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MANDOVI MOTORS PVT. LTD. Mr Osamu Suzuki MrVKMalhotra
MARUTIMANDOVI MOTORS PRIVATE LIMITED Maruti Motors Pvt. ltd. was awarded the Maruti Dealership in 1983 and commenced operations at Bangalore on June 14th 1984.They were subsequently awarded dealership points at Mysore in 1986 and based on their performance at these two cities the Mangalore dealership was awarded to them in 1989.They were awarded ISO 9002 certification for Bangalore in 1997. Origin of Organization Mandovi Motors is one of the Aroor group of companies, which deals with passenger car manufactured by Maruti Udyog Limited. Mandovi Motors is one of the pioneers amongst Maruti dealers who started its operations during 1084 with one showroom at St. Marks road and one workshop at Wilson garden. During June 1986 one more workshop and showroom at Mysore and 1990 at Mangalore was started. Mandovi Motors is the first dealer in India to have introduced the concept of having exclusive showroom for luxury models such as Esteem and Zen in order to achieve greater customer satisfaction.
Present Status of the Organisation Today Mandovi Motors has 5 workshops and 1 body shop at Bangalore. Mandovi also has showrooms and workshops at Mangalore and Mysore. This makes Mandovi Motors the Maruti Udyog Ltd. dealer with the largest infrastructure in Karnataka. Mandovi Motors has also the distinction of having introduced the Maruti genuine part showroom in Bangalore.
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MANDOVI MOTORS PVT. LTD. Amongst the Maruti dealers Mandovi Motors is the leading dealer in south India. Mandovi holds 45% of the market share in Karnataka. Mandovi also has expanded by opening a separate warehouse for spare parts and car accessories.
In their quest for excellence, Mandovi Motors implemented ISO 9002 quality management system standards and got its ISO 9002 certification during April 1997 from M/s. Vincotte International, Belgium and it was started as the best documental procedures in the country.
For the year 1997 Mandovi was adjudged the best Maruti dealer in the country and was awarded Maruti's top and highly coveted All-India platinum award for all round performance in sales, service and spares.
Mandovi's Quality Policy "We at Mandovi pledge to make quality a way of life through continuous improvement in customer satisfaction." Mandovi's Quality Objectives M: - Maintaining operational and financial health of the company. A: - Adhering to quality standards N: - Nurturing and caring for the environment and society. D: - Delighting customers. 0: - Offering personalized services. V: - Visualizing customer expectations. I :-Improving. Fact Sheet Among the many notable achievements of the dealership the most prestigious have been:
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MANDOVI MOTORS PVT. LTD. 1. The spares) platinum for the award year for overall from performance Udyog (sales, Limited, service and the and Hall
1997
Maruti
of Fame Gold award for the years 1998 and 1999. 2. India's largest selling dealer for the Maruti Omni from the years
1991-1996- 5 years in a row. 3. South roads of India's largest are selling sold dealer by consistently Motors. from the last 15
years. As on date 6 out of every 10 Maruti vehicles playing on the Karnataka Mandovi Mandovi's market share of Maruti sales in Karnataka is around 45%. 4 Over 1,75,000 sq. Ft. of the land strategically spread over
Bangalore is dedicated to the Maruti operations.
8. India's
second
largest
dealer
for
Maruti
genuine
parts
for
years
in a row and with a sale to inventory ratio of 1:2:5.In Bangalore there is an exclusive MGP shop and one of its kind centralized warehouse of 10,000 sq. ft. with a fully computerized network system liking all
Dedicated and motivated team of professional branches.
Highest sale of car accessories in the country.
7. New centrally located state-of-the art showroom at Bangalore.
8.All
India
marketing
and
sales
promotion
awards
have
been
consistently awarded from Maruti for the last four years.
29
MANDOVI MOTORS PVT. LTD. 9. Managers with necessary empowerment at all branches to effectively monitor the operations. performance. 10. month latest Karnataka's (5 in over and 5000 state largest vehicles. of the network alone). All art the for service of with are a total of 8 per with Periodic management review meetings organized for reviewing of
workshops
Bangalore
Number workshops
vehicles fully tools,
serviced equipped etc.
equipment,
special
employing
over 500 people.
11. For the calendar year 2000 Mandovi recently received two p restigious all India awards from Maruti:a) The All India Best Service workshops award (Non-Metro) was warded to Mandovi Motors, Mangalore. b) Overall Best Performance in spare parts All India, year 2000.
Mandovi motors steers ahead with grit and determination to add many more feathers to their already multifarious cap. They shall always strive for continuous empavement in the quality of their services to the customers and keep the position as the leading in South India.
Dealer-Customer Relationship "A customer is the most is the most important person ever in this office...in person or by mail." "A customer is not dependent on us... we are dependent on him." "A customer is not someone to argue or match wits with. Nobody ever won an argument with a customer. Customer is the Boss."
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MANDOVI MOTORS PVT. LTD. "A customer is a person who brings us his wants. It is our job to handle them profitably to him and to ourselves." Customer relationship is the key driver to the long term success of any business. A satisfied customer not only comes back to an organisation as a repeat customer, but also acts as a catalyst to source new customers through his positive reference.
31
PRODUCTS
Maruti Suzuki Omni Maruti Suzuki Zen Maruti Esteem Maruti Baleno Maruti Suzuki Wagon Maruti Alto
Maruti Suzuki Versa
32
DATA ANAYLSIS
Concepts In Car Finance You have finally decided on which car to buy. Congratulations, but you have covered only half the distance you need to travel to own your dream car. The second half, which is probably the more difficult patch, is about to begin with the question "How are you going to pay for it?" Well, writing out a cheque for the value of the car is the easiest solution. But that is the preserve of a select few and for most of us, availing of a finance scheme to purchase the car is the best option. Even for those who are able to make a full payment should check a financing option before taking the final decision. The current sluggish market conditions, coupled with the lowering of interest rates, have made the car finance market extremely competitive. Finance companies, dealers and manufacturers are wooing buyers with "special offers", discounts, "0% finance", low interest rates. If you are looking for a great deal, the time is now! Now that you have decided to avail a finance scheme for your car, the next step is to select the scheme that suits you the best. Your newspaper is full of tempting offers from a host of finance companies each luring you with a basket of freebies. On top of that are claims and counterclaims about their interest rates and down payments. So how do you decide which is the best finance option for you? To select the best option you need to first familiarize yourself with the mechanics of this market after which, you will be in a better position to make up your mind. In the sections that follow, I have tried to acquaint you with the basics of car finance, the various terms and some insights into how the schemes work.
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Financing Options
There are essentially three basic financing options available to you; Loan, Hire purchase and Lease. Each of these options has individual merits to suit a particular kind of borrower.
Loan When you take a loan to buy a car, you are the registered Dwner of the car and the financier creates a lien on the same as a security. You repay the loan (principal) along with interest over a pre-agreed period (tenure) in the form of periodic installments. In ase of a default in payments the financier has the option of invoking the lien clause. Businessmen/self-employed persons and companies that use such a car for business purposes can treat the interest paid on the loan as a business expense and also avail of tax deductions against depreciation, in any accounting year. Loan agreements attract stamp duty depending on the state in which they are executed. Hire Purchase
In this method of financing, the financier purchases the vehicle on your behalf. You hire it out from the financier with the intention of buying it from him at the end of a pre-determined period. In hire purchase, although you are the registered owner, the car is hypothecated to the financier (an endorsement is made in the R/C Book) thereby giving the financier the legal ownership of the car. The hypothecation is removed by a special procedure (mentioned under documentation later in this article) after the installments are fully paid off. For businesses/self-employed persons/companies, a car taken on hire purchase appears on their Balance Sheet as an asset and they can get tax
34
MANDOVI MOTORS PVT. LTD. deductions against the interest paid, along with the depreciation, in any accounting year. Please be aware that a hire purchase transaction attracts additional sales tax, turnover tax, value-added tax, stamp duty, etc. depending on the state in which the agreement is being signed. LEASE: In a lease, the financier leases out a car to you for a certain time-period, after which the financier can either take back the car or sell the car to a third party. In effect, you will not be the owner of the car either during the tenure of the lease or even after the lease has been terminated. This is the technical definition of a lease and you may come across several variants depending on the financier you are dealing with. Lease is an attractive option for companies who are acquiring cars in the name of the company to be given out to their employees, with the employees having an option of buying the car on a later date at a nominal value. This helps the company is two ways. One the cars do not appear as assets on the Balance Sheet of the company (cars are usually treated as unproductive assets and best kept off the Balance Sheet), and two, the company can treat the entire lease rentals paid (principal + interest) as a business expense and avail of substantial tax deductions. However, under a lease, the financier, not you, claims the depreciation on the car.
Like hire purchase, a lease transaction attracts additional sales tax, turnover tax, value-added tax, stamp duty, etc. depending on the state in which the agreement is being signed.
35
MANDOVI MOTORS PVT. LTD. A comparison between Loan, Hire Purchase and Lease Loan Registered Owner Legal Owner Depreciation claimed by Tax deduction claimed by you on You You You Interest paid Lease Financier Financier Financier Rentals paid
Hire Purchase You Financier You Interest paid
Anatomy of a finance scheme When you ask a financier to give you a scheme, you will get a quote that looks like this: Type of Finance Option Finance Amount Margin Money Rate of Interest (IRR) Tenure Payments - Hire Purchase - 85% -15% -14.5% - 36 months Monthly in arrears
EMI per lakh of finance amt. - Rs.3, 442 Is this a good deal? Are all the figures consistent i.e. does the EMI as per the rate quoted? Well, to answer these questions you need to know what the various components of a finance scheme are and in all likelihood you will have to decide on all or some of them before you finalize your deal. So in this section we will delve in detail into the components of a finance scheme.
36
MANDOVI MOTORS PVT. LTD. Finance Amount - This is the principal amount that the financier is ready to fund you for. The financier arrives at this figure depending on your profile (income, repayment track record etc) and also the car that you intend to acquire (resale value of the car). For a lease transaction, the finance amount cannot be less than 100% of the value of the car.
Down Payment - This is the difference between the value of the car and the finance amount. The down payment has to be paid by you to the financier at the initiation of the scheme. This is also called Margin Money by some financiers.
LTV - The Loan To Value is the ratio between the Finance Amount and the value of the car, represented as a percentage. The LTV usually varies from 60% to 90%.
Flat Rate of interest - This the simple interest rate (annualized) on the principal. This can be calculated using basic school level mathematics. In the case of the above scheme the flat rate is 8%.
Internal Rate of Return - The rate of interest charged on the principal, when calculated on a reducing balance basis is known as the IRR. Although IRR is a more accurate measure of what is being charged to you, it is somewhat difficult to calculate on the fly. You will require tools like a financial calculator or Excel worksheets to determine the IRR of a particular scheme. However one rule of thumb is that for any finance scheme the IRR is approximately 1.8 times the Flat Rate.
Tenure - This represents the length of the financing arrangement usually expressed in months. The financier arrives at the tenure based on your profile (stability of source of your income and your ability to pay) and the type of car you have chosen (based on the obsolescence and resale values).
37
MANDOVI MOTORS PVT. LTD. Periodicity of Payments - Represents at what frequency you make payments to the financier to repay the principal and the interest amount over the tenure of the financing arrangement. The options are Monthly, Quarterly, or as customized by the financier to your requirements.
Payment in Arrears or Advance - Once the periodicity of payments if fixed, you should know whether the payment is due at the beginning or at the end of the agreed period, i.e. at the beginning of the month or end of the month in case you have agreed on a monthly repayment scheme.
Terminal Value - This is relevant only in case of a lease transaction, and is essentially the value at which the financier agrees to take back the car or sell it to a third party at the end of the lease tenure.
Security Deposit - Sometimes financiers take a deposit from clients as security. This is done when the transaction is perceived to be risky. But more often than not, financiers reduce interest rates in case you give them a security deposit. The security deposit could be interest bearing or non-interest bearing depending on the scheme offered by the financier.
Installments - Based on all the above, the financier arrives at what you need to pay them at the periodicity decided over the tenure of the scheme towards clearing the finance amount and the interest charge. In case all the installments are equal and paid monthly, they are called Equated Monthly Installments (EMI).
Other Charges - Depending on the nature of financing, the scheme will attract additional sales tax, turnover tax, value-added tax, stamp duty, etc. depending on the state in which the agreement is being executed. This amount is borne directly by you and often clubbed with the Down Payment.
38
MANDOVI MOTORS PVT. LTD. Pre-closure Charge - Some financier's levy a penalty called pre-closure charges, in case you repay the amount due before the agreed tenure. It would do good to clarify this point with the financier, in case you intend to clear the outstanding well before the final due date. These are quite a few parameters to decide on. But spending time to decide on each of them and negotiating with your financier on the same right at the onset will ensure that you get the best deal and also peace of mind throughout the tenure of the scheme.
The finance scheme product range

If you have been shopping around for car finance schemes for sometime, I am sure you must by now be submerged under a plethora of schemes that financiers have offered you. Financiers consider it fashionable to brand their schemes but at the end of the day they are all concocted by cleverly mixing the various scheme parameters and documentation requirements that I have mentioned in the earlier sections. Some of the popular packaged schemes are: Margin Money Scheme This is a basic car finance scheme where the finance amount/principal amount is less than 100% of the value of the car (typically 85%). Installment in Advance Scheme Instead of collecting high margin money / down payment financiers often collect a certain number of installments in advance so as to preserve the LTV. 100% value of the car is taken, interest charged on it and installments worked out on the same. Usually 2 to 5 installments are collected in advance. This would be adjusted against the last few installments. In a three-year loan, if four installments are collected in advance, then you repay only 32 installments. Stepped Scheme In a stepped scheme the installments progressively increase or reduce from year to year. There could also be a combination of step-up and step-down
39
MANDOVI MOTORS PVT. LTD. installments. This type of scheme works best for salaried employees where there are predictable movements in disposable income. Balloon Scheme This is a scheme where you take finance only for a certain value of the car, say 85% and the balance 15% is paid at the end of the contract as a bullet payment. Such schemes result in lower installments and are usually offered by financiers who have direct tie-ups with manufacturers or dealers. Security Deposit Scheme A certain percentage of the value of the car is taken by the as a security deposit. The financier funds 100 % of the value of the car and the interest and installments are calculated accordingly. But although the financier is funding 100% of the value of the car, his exposure is lowered by the amount collected as security deposit. The security deposit could be interest bearing or non-interest bearing and is refunded to you at the end of the contract. No Income Scheme Such schemes are sanctioned without you requiring to give your income proof as listed above. Although this may sound great, the flip side is that the amount financed is much lower (around 50%) than what you would have got funded had you submitted the income proof. The other documentation is nonetheless mandatory. Relationship Offers These are special schemes offered by financiers, especially based on the relationships that you have with them, by virtue of being an existing customer or a customer of any of their other products. This usually entails a reduction in the interest rate, or an extended tenure. The Financiers The various players offering car finance schemes can be categorized under two broad heads namely, Bank Non Banking Finance Companies (NBFC)
40
MANDOVI MOTORS PVT. LTD. Usually Banks have an advantage in sourcing cheaper funds and are hence able to offer better rates of interest than NBFCs. Several of the financiers have tied up with manufacturers to offer competitive finance scheme on the respective manufacturers' products. It is through tie-ups like these that manufacturers pass discounts to the end customer that finally translate into a lower installment payments. Almost all financiers have tie-ups with Dealers because the dealership is the place where 90% of the finance enquiries originate. To promote sale or to liquidate stocks, dealers offer discounts to financiers with whom they have tied up who in turn pass it to the customers in the form of reduced interest rates. It would be a good idea to avail of schemes either from a financier who has a preferred financier tie-up with the manufacturer whose car you have chosen to buy or a financier who has a tie-up with the dealership from which you are purchasing the car. Making it even easier for potential car buyers some manufacturers have floated car financing arms. A manufacturer by virtue of his size can mobilize cheap funds and hence give you a good deal provided you are buying one of their models. Most retail banks and leading financial institutions offer car finance schemes. Interest rates vary from 12% to 16%. But remember - these rates are only indicative to give you a flavor of the market. A bit of negotiation can help you reduce interest rates by as much as 2%! Some hard bargaining. How does it all work? Once you have announced your intention to buy a car on finance, and enquired with a financier for a quote, be ready to go through the following steps: A sales person from the financier or one of their DSA's person will contact you to understand your requirement. A DSA (Direct Selling Associate) is an agency to whom the financier has given the responsibility of acquiring customers. The sales / DSA person will give you a quote either across the table or maybe with a lag in case
41
MANDOVI MOTORS PVT. LTD. he needs prior approvals requirements will be before quoting. Also made known the to documentation you.
Based on the initial quotes from a number of financiers you need to shortlist Once you a set you think that finalized your financier suit your requirement the best. and the scheme details, the Thereafter you should bargain with the selected set for the best deal. have sales person from the selected financier will give you the final quote and request for the documents that he has already appraised you of. On collecting the necessary Based the financier documents, on your amount, a the sales person your and IRR). initiates eligibility On to the is being verify approval determined found your process. (mainly the documents, tenure Field
principal
eligible,
conducts
Investigation
address and a few other basic details. Sometimes, if applicable,
your credit history is also crosschecked with other financiers. king Proofs, Proofs & More Proofs - Documentation Requirements The financier, before approving your scheme will seek documents towards - Proof of Identity & Signature - Proof of Residence - Income Proof - Proof of Office and Years in Business / Service
Documents accepted as proof of identity & signature for individuals - Passport - Driving License - Voter's Identity Card - PAN Card
42
MANDOVI MOTORS PVT. LTD. For firms and companies Partnership firms - The Partnership Deed is required along with a photograph of the partner who is executing the document. Private Limited and Public Limited companies - A copy of the Memorandum of Association, the Articles of Association, and Form 32 duly completed. For proof of signature your banker will issue a letter verifying your signature. For most financiers, this is mandatory. Proof of identity such as your passport or voter's identity card, which carries your signature, may also be accepted.
Documents accepted as proof of residence For individuals, one or more of the following are required: - Telephone Bill - Electricity Bill - Ration Card
In case of Partnership Firms and Private Limited companies, the residence proof of a partner or a director is required.
Documents accepted as income proof For Salaried Individuals Previous year's Income Tax Returns and / or Form 16, along with the salary slip. For self employed and partnership firms and private limited companies Last two years' Income Tax Returns and / or Audited Accounts For Public Limited Companies Last two years' Audited Accounts.
43
MANDOVI MOTORS PVT. LTD. Proof of office and years in business/service If you are a salaried individual, a letter from the employer confirming that you have been in employment for the given number of years may be required. Your salary slip / a salary certificate may suffice for most financiers as proof of service. If you are other than a salaried individual, you may furnish one or more of the following documents: Registration papers of the office, if owned; Lease deed / Rental agreement, if leased / rented; Telephone Bill / Electricity Bill / Shops and Establishments Certificate / Sales Tax Certificate. The final word To summaries, Before you start shopping for a finance scheme you need to do two things: Check your bank balance and decide on how much down payment you can afford. Remember that it's always better to pay a higher do\vn payment if you can afford it since it turns out to be cheaper in the long run. Look at your income stream and get a fix on the installment that you will be able to pay (monthly or quarterly) without disturbing your current lifestyle and for how long. Armed with these figures you can start looking for a financier, either by responding to their ads, or by signing up on some of the websites that offer match making services between financiers and potential clients. Have enough time on your hands while searching for your finance scheme. Rushing into finalizing a scheme is a cardinal sin and you are likely to end up paying more. Call from quotes for as many financiers as possible. Shortlist a set of at least 3 financiers based on the initial quote and then negotiate with them on each component of the scheme. Armed with the rudimentary knowledge about car financing you will be able to ask the right questions and get your self the best deal.
Remember not to fall for longer tenure lower installment schemes, because eventually you pay a higher interest amount and more often than not, the market
44
MANDOVI MOTORS PVT. LTD. value of your car depreciates much faster, than the rate at which you have been retiring the principal. Also, do not fall for the 0% interest schemes, since if you are not paying the interest, then someone else is and it is usually the manufacturer in the form of a discount to the financier. Once you are able to get a handle on the discount amount, you can work out a scheme better suited to your requirements.
Here's a secret. In today's world, the consumer is King. Two individuals availing a finance scheme from the same source can get different deals. So negotiations can go a long way to get you better deals and the maximum bang for your buck. Car Finance: Driven by Innovation The auto finance market was very active in 2001-02, with over 70 per cent of cars sold being financed. In fact, industry sources attribute this success of auto companies to the effectiveness of their alliances with financing institutions. These institutions believe that car-makers owe much of their sales to innovative consumer finance. Mature Market is Good: The car finance market has reached a new level of maturity, so much so that the car-maker, the automobile dealer and the financier now work together to provide better features and funding options for the buyer. Here again, the flexibility of operations among non-banking finance companies (NBFCs) indicates they have been in the forefront of this new trend. On the contrary, banks are hamstrung by the rigid lending regulations and inflexible operations. Their rates are, consequently, higher. However, thanks to increased operational efficiencies, a few private sector banks, such as HDFC Bank and ICICI Bank, have managed to make a dent in the car finance market this year.
45
MANDOVI MOTORS PVT. LTD. Benefits From the Trio: The coordinated efforts by the manufacturer-dealerfinancier trio have also enabled them offer better rates to the car buyer. Depending on the manufacturer, tenure of the loan and credit history of the car buyer, interest rates, on a reducing balance basis, now hover in the 10-13.5 per cent range for new cars compared to 13-16.5 per cent till early last year. For old cars, the interest rates continue to be in the 16-18 per cent range. The interest rates also differ between various car models of the same manufacturer, depending on the model the company wants to promote. Behind Attractive Rates: The attractive rates of interest most NBFCs are able to offer are because they operate on a 'rack rate' system. This system is arrived at when the financing company negotiates with different car manufacturers and local car dealers to squeeze out the maximum discounts from them. This is why dealerlevel direct discounts to customers are almost non-existent now on most car models. These discounts from the manufacturer and dealer also called the "subvention amount' are then absorbed by the financier helping him offer the best interest rates. Though the official lending rates fluctuate in the 14-16 per cent range, the trio ensures the loan to the consumers at a much lower rate. Some car companies, such as Maruti Udyog Ltd (MUL) and Hyundai Motor India Ltd (HMIL), have entered into preferred financing arrangements with a few banks and NBFCs. These institutions, in turn, offer lower interest rates. Manufacturers with "preferred financing arrangements' offer additional discounts to the financier for the sales promotion of their products. This discount helps the financier provide consumers with a lower rate of interest. Faced with mounting competition from NBFCs, some MNC banks have also started absorbing the subvention amount from the dealers who, in turn, either pass on a manufacturer discount or a part of their margin, so that the buyer gets a more reasonable rate of interest. However, other banks, particularly public sector banks, are still hesitant to do this. As a result, their rates are not competitive. Again, while most MNC and private sector banks operate through direct selling agents who
46
MANDOVI MOTORS PVT. LTD. have considerable margins to allow negotiations with customers, public sector banks mostly operate directly with the car buyer. A car buyer can attempt to negotiate the subvention amount as a direct discount from the manufacturer or dealer. But the amount will always be lesser than that paid to the financier. The discount from the manufacturer is, in most cases, paid directly to the financiers and not to the consumers. In some cases, the dealer offers a combination of a partial discount and/or free accessories. However, in such a situation, the car buyer cannot expect to get a lower interest rate on the financed amount. Direct Discounts Unattractive : Manufacturers also discovered that direct discounts to the car buyer did not result in increased sales. Attractive interest rates just aided the process. The increased preference for financing car purchases through loans, thus, seems justified.
47
Analysis of the car financing companies in terms of their offerings

Car Financing Companies Today several financial institutions and companies are offering car finance. Some of the leading players in the car financing market. ICICI bank, HDFC bank, Centurion bank, Development Credit bank and Saraswat Bank are the private sector banks offering car loans. The finance companies car loans include Cholamandalam Finance, Kotak Mahindra, Sundaram Finance and Tata finance. Multinational banks hike ABN Amro, ANZ Grindlays, American Express Bank, Citi bank, HSBC, Standard Chartered Bank have also considerable car finance business. Countrywide, Associate Orix are some of the corporates having considerable market share in the sector. The following tables compare some of the banks providing car loans, their features, schemes offered by them and their operational style, documents required eligibility criteria etc.] The following tables compare some of the banks providing car loans, their features, schemes offered by them and their operational style, documents required eligibility criteria etc.
Scheme Name Locations Joint Application Eligibility
ICICI Bank Car loans Delhi, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai Applicable For salaried minimum salary should be Rs 100000 per annum and for self employed income tax return should be more than Rs 60000.
Standard Chartered Car loans Delhi, Bangalore, Chennai, Kolkata, Mumbai Not Applicable Age should be within 21 to 65 years including the loan period.
48
MANDOVI MOTORS PVT. LTD. Minimum & Maximum Loan Amount Tenures Interest Calculation periodicity Prepayment Minimum of Rs 75000 to a Maximum of 90% of the car value. Minimum of 6 months to a Maximum of 5 years. Monthly Reducing Balance. Yes, at 2% extra. Minimum of 50% of the car value to a Maximum of 90%of the car value. Minimum of 1 year to Maximum of 5 years. Monthly Reducing Balance.
2% on the Extra principal amount. Loan Type Margin Margin Deposit Amount NA NA Margin Money 10% of the car amount. 10% to 15% depending on model to model. Processing Fees NA NA Documentation charges NA NA For Salaried: Salary For salaried: Salary proof, ITR, 2Documents to submit slip, from 16, identity signed photograph, residence proof proof, residence proof, (license, passport, ration card, ID photographs, age card), loan application form. For Selfproof. For SelfEmployed: ITR, 2-signed photograph, Employed: Form 16 A, income proof, address proof, loan identity proof, application form and financial residence proof, statements. photographs, age proof, Income Tax Return. Interest 12% to 17% depending on car models. Economic car 15%, Mid size car 14%, Luxury car 14.5%
Scheme Name Locations Joint Application
CITIBANK Car loans Delhi, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai. Applicable
ABN AMRO Car loans Delhi, Bangalore, Chennai, Kolkata, Mumbai, Hyderabad Applicable
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MANDOVI MOTORS PVT. LTD. Eligibility Maximum age should be less than 65 years, should be an income tax payee and have bank account more than 1 year old. For cars like M800, Zen, Omni, Wagon R the annual income should be more than Rs. 60,000 and for cars like Esteem, Baleno it should be more thanRs. 1,00,000
Minimum of Rs 75000 to a Minimum & Maximum Minimum of Rs.50000 and MONTH/ SEPTEMBER Maximum OCTOBER DECEMBER of 85% for NOVEMBER new Loan Amount Maximum of 90% of the value of car and 80% for old standard Cars. MODEL car . CS CF CS CF CS CF CS CF Minimum of 1 year to a Minimum of 1 year to a Tenures M 800 97 73 92 64 78 58 78 48 Maximum of 5 years. Maximum of 5 years. Omni 47 34 46 37 51 42 56 43 Monthly Reducing Monthly Reducing Balance. [merest Calculation Zen 44 33 31 24 26 21 42 29 periodicity Balance. Esteem 12 8 10 6 0 0 6 2 3% on the principal Prepayment 3% 0 Baleno 0 0 0 2 1 1 outstanding 0 amount. Wagon 35 24 26 18 25 17 42 27 Loan Type Margin Margin R Deposit Amount NA Alto 32 23 NA 29 23 23 15 33 24 Margin Money 10% 10% to 15% on Versa 2 1 1 of the car 0 amount. 2 1 0 depending 0 model to model. TOTAL 269 196 235 172 207 155 258 173 Processing Fees NA NA Documentation charges NA NA For Salaried: Salary slip, For salaried: Salary slip, ITR, Documents to submit from -16, residence proof, 3 photograph, ID proof (license, years income tax return passport, ration card, PAN card). photographs. For SelfFor Self-Employed: ITR, Employed: Form -16, photograph, ID proof (license, residence proof, passport, PAN card) and financial photographs, 3 year Income statements. Tax Return, balance sheet and profit and loss statement. Interest 2% to 3 % per month. 14.5% to 15% pa depending on car models.
DATA ANALYSIS
Comparison of Cars Sold With Cars Financed- Model Wise TABLE-1
50
Graph- 1a
Comparison of Cars Sold With Cars Fiananced- M 800

No. of Cars 150 100 50 0 97 73 92 64 78 58 78 48
Sept.
Oct. Month Cars Sold
Nov.
Dec.
Cars Financed
51
MANDOVI MOTORS PVT. LTD. Graph- 1b,1c and 1d
Comparison of Cars Sold With Cars FianancedOmni

No. of Cars 100 50 0 47 34 46 37 51 42 56 43
Sept.
Oct. Months Cars Sold
Nov.
Dec.
Cars Financed
Comparison of Cars Sold With Cars Fiananced- Zen

No. of Cars 60 40 20 0 44 33 42 21
31
24
26
29
Sept.
Nov.
Dec.
Cars Financed
Comparison of Cars Sold With Cars FianancedEsteem

No. of Cars 20 10 0 Sept. Oct. Months Cars Sold Cars Financed 12 8 10
Nov.
Dec.
52
MANDOVI MOTORS PVT. LTD. Graph- 1e, 1f and 1g 1d
Comparison of Cars Sold With Cars FianancedBaleno

No. of Cars 3 2 1 0 2 0 0 0 0
Sept.
Nov.
Dec.
Cars Financed
Comparison of Cars Sold With Cars Fiananced- Alto

No. of Cars 40 30 20 10 0 32 23 29 33 23 23 15 24
Sept.
Nov.
Dec.
Cars Financed
Comparison of Cars Sold With Cars FianancedVersa

No. of Cars 4 2 0 Sept. 2 2 0 Oct. Months Cars Sold Cars Financed
Nov.
Dec.
53
Graph- 1h and 1i
Comparison of Cars Sold With Cars FianancedWagon R

No. of Cars 50 0 Sept. Oct. Months Cars Sold Cars Financed Nov. Dec. 35 24 26 18 25 42 17 27
Comparison of Total Cars Sold With Total Cars Financed

No. of Cars 300 200 100 0 269 196 235 172 207 258 155 173
Sept.
Nov.
Dec.
Cars Financed
54
MANDOVI MOTORS PVT. LTD. Comparison of cars sold with cars financed- Model wise Inference: Table 1 gives us the comparison between the number of cars sold and the number of cars financed between September and December 2004. The sale of cars is highest in the month of September due to the half-year ending period. In these four months under observation, on an average 72% of the cars sold have been financed. This highlights the importance of car financing in today's era. As observed in Table 1, Maruti 800 is still the most preferred car followed by Omni and Zen among other models. 35% of the total cars sold is that of M 800. Graphs la to Ih show us the comparison between the number of cars sold and cars financed in respect of all cars between September and December 2004. Graph li gives us the comparison between the total cars sold and financed.
55
Comparison of cars financed with cars not financed- Model Wise

MONTH/ SEPTEMBER CF CNF 24 13 11 04 00 11 09 01 73 Table 2 OCTOBER CF CNF 64 37 24 06 00 18 23 00 172 28 09 07 04 00 08 06 01 63 NOVEMBER CF CNF DECEMBER CF CNF 30 13 13 04 01 15 09 00 85
MODEL M 800 73 Omni 34 Zen 33 Esteem 08 Baleno 00 Wagon R 24 Alto 23 Versa 01 TOTAL 196 CS- Cars Financed
58 20 48 42 09 43 21 05 29 00 00 02 10 01 00 17 08 27 15 08 24 01 01 00 155 52 173 CNF- Cars Nots Financed
Graph 2a
Comparison of Cars Financed With Cars Not Financed- M 800

No. of Cars 100 50 0 73 24 Sept. 64 28 58 20 48 30
Oct.
Nov. Months
Dec.
Cars Financed Cars Not Financed
56
MANDOVI MOTORS PVT. LTD. Graph- 2b,2c and 2d
Com parison of Cars Financed W ith Cars Not Financed- Onm i

No. of Cars 50 0 Sept. Oct. Months Cars Financed Cars Not Financed Nov. Dec. 34 37 13 9 42 9 43 13
Com parison of Cars Financed W ith Cars Not Financed- Zen

No. of Cars 40 20 0 33 11 Sept. 24 7 21 29 5 13
Oct. Months Cars Financed
Nov.
Dec.
Cars Not Financed
Com parison of Cars Financed W ith Cars Not Financed- Baleno

No. of Cars 2 1 0 1 0 Sept. 0 0 0 Nov. Months Cars Financed Cars Not Financed 1 0 Dec. 1
Oct.
57
MANDOVI MOTORS PVT. LTD. Graph- 2e, 2f and 2g
Com parison of Cars Financed W ith Cars Not Financed- W agon R

No. of Cars 40 20 0 24 11 18 8 17 8 27 15
Sept.
Nov.
Dec.
Cars Not Financed
Com parison of Cars Financed W ith Cars Not Financed- A lto

No. of Cars 40 20 0 23 9 23 6 15 8 24 9
Sept.
Nov.
Dec.
Cars Not Financed
Com parison of Cars Financed W ith Cars Not Financed- Versa

No. of Cars 2 1 0 1 1 0 Sept. Oct. Months Cars Financed Cars Not Financed Nov. 1 1 1 1 0 Dec.
58
MANDOVI MOTORS PVT. LTD. Graph- 2h
Comparison of Total Cars Financed With Total Cars Not Financed

250 No. of Cars 200 150 100 50 0 Sept. Oct. Months Cars Financed Cars Not Financed Nov. Dec. 196 172 73 63 173 85
155 52
Comparison of cars financed with cars not financed Model Wise Inference: Table 2 gives us the comparison between the number of cars financed and the number of cars not financed between September and December 2004. In there four months under observations, on an average only 28% of the cars sold have not been financed. It is worth noting here that in all the four months under observation, the number of cars financed is more than the number of cars not financed in respect of all the models.
59
Comparison of % of cars sold Month Wise

MONTH/ MODEL M 800 Omni Zen Esteem Baleno Wagon R Alto Versa TOTAL CS 97 47 44 12 00 35 32 00 269 % 36 18 16 05 00 13 12 00 100 CS 92 46 31 10 00 26 29 00 235 % 39 20 13 05 00 11 12 0 100 CS 78 51 26 00 02 25 23 02 207 % 38 25 13 00 00 12 12 00 100 CS 78 56 42 06 01 42 33 00 258 % 30 22 16 03 00 16 13 00 100 SEPTEMBER Table- 3 OCTOBER NOVEMBER DECEMBER
Graph 3a
Comparison of Cars Sold in the Month of September 2004

12% 13% 0% 4% 16%
Graph 3b,3c and 3d
M 800 Omni M Zen Esteem Baleno Wagon R
0% 37%
18%
Alto Versa
60
Comparison of Cars Sold in the Month of October 2004

11% 0% 4% 13% 20% 12% 0% 40%
M 800 Omni M Zen Esteem Baleno Wagon R Alto Versa
Comparison of Cars Sold in the Month of November 2004

11% 1% 37%
12% 1% 0% 13%
25%
Alto Versa
Comparison of Cars Sold in the Month of December 2004
M 800 Omni M Zen
13% 16% 0% 2% 16%
0%
31%
Esteem Baleno Wagon R
22%
Alto Versa
Graph 3b,3c and 3d
61
Comparison of Cars Sold in the Month of October 2004

11% 0% 4% 13% 20% 12% 0% 40%
M 800 Omni M Zen Esteem Baleno Wagon R Alto Versa
Comparison of Cars Sold in the Month of November 2004

11% 1% 37%
12% 1% 0% 13%
25%
Alto Versa
Comparison of Cars Sold in the Month of December 2004
M 800 Omni M Zen
13% 16% 0% 2% 16%
0%
31%
22%
Alto Versa
62
Comparison of % of cars sold - Month wise Inference: Table 3 gives us the percentage figures of the cars sold in respect of various models during the months September to December 2004. On an average, Mandovi Motors is selling 243 cars a month with a major part coming from M 800, Zen and Omni. As we observe, Maruti 800 is the leader with an average sales of 36% followed by Omni and Zen in all the months. The sale of Wagon R and Alto are gradually picking up. MUL will have to look into Versa, because right from its launch in 2001 sales have been dropping every month. To quote, during the observation months, only in the month of November, 2 cars have been sold. Graphs 3a to 3d show us the comparison with respect to % of cars sold during September to December 2004.
63
Comparison of No. of Cars financed by various banks- Month Wise

Table 4 Month/Bank Citibank Stand Chart ICICI ABN Amro Hongk ong Nat.Banks Sundram Others Total September 16 19 40 24 12 50 35 196 October 8 30 29 13 26 27 47 172 Graph 4a November 13 14 30 8 14 39 18 27 155 December 8 25 32 8 17 44 17 22 173
No. of cars financed by various Banks in Sept.2004 60 50 50 40 40 24 30 19 16 20 12 10 0 0

iti
35
ba ta nd nk C ha rt A ICIC B I N A m H on ro gk on N at g .B an k S un s dr am O th er s
Figure 1
64
Graph 4b and 4c
No. of Cars Financed by Various Banks in October 2004

50 40 30 20 10 0
Ba nk
47 30 8
ha rt I Am ro
29 13
26
27
ng
an ks Na t. B
iti
St an
Total Cars Financed
No. of Cars Financed by Various Banks in November 2004

50 40 30 20 10 0
Ba
Ho ng
AB
30 13 14 8
I ng Am ro
39 14 18
O th er s
IC
Ko
IC
27
ha rt
nk
an ks
ra m Su nd a
Total Cars Financed

Graph 4d
Ho ng
Na t. B
iti
St an
AB
O th er s
65
IC
Ko
IC
No. of Cars Financed by Various Banks in December 2004

50 40 30 20 10 0
nk Ba
25 8
ha rt
32 8
I Am ro ng
44 17 17 22
an ks
ra m Su nd a
Total Cars Financed

Comparison of no. of cars financed by various banks- Month wise Inference: Table 4 gives us the details about the number of cars financed by various banks during the month September to December 2004 On an individual basis, ICICI Bank has financed maximum number of cars followed by Standard Chartered and HongKong Bank. Nationalized banks put together have also financed maximum number of cars. Citibank which was the leading finance company for Maruti cars in 2003 is slowly loosing its hold in the market. There are many other finance companies with a very small share who have been clubbed and shown as others in the analysis. Graphs 4a to 4d highlights the number of cars financed by various companies on a month-to-month basis.
Ho ng
Na t. B
iti
St an
AB
O th er s
66
IC
Ko
IC
Comparison of No. Of cars financed - Company wise

Graph 5 Citibank Month/MODEL M 800 Omni Zen Esteem Baleno Wagon R Alto Versa Total September 4 3 5 0 0 3 1 0 16 October 3 3 1 0 0 0 1 0 8 November 6 2 2 0 0 2 1 0 13 December 1 3 2 0 0 2 0 0 8
Graph 5a
Cars Financed by Citibank in Sept.2004

0 M 800 11 Omni Zen Esteem Baleno 0 7 7 2 Wagon R Alto Versa
Graph 5b, 5c and 5d
4 9
67

C ars financed by C itibank in O ct. 2004 0 0 0 0 1 1 3 0 M800 O m ni Z en E steem B aleno W agon R 3 A lto V ersa
C ars financed by C itibank in N ov. 2004 M800 0 0 0 2 2 2 1 6 O m ni Z en E steem B aleno W agon R A lto V ersa 0 Cars financed by Citibank in Dec.2004 0 M800 2 1 O m ni Z en E steem 0 0 2 B aleno 3 W agon R A lto V ersa
68
Comparison of No. of Cars Financed Company wise

Table -6 Standard Chartered Month/MODEL M 800 Omni Zen Esteem Baleno Wagon R Alto Versa Total September 6 4 4 0 0 3 2 0 19 Graph 6a October 10 6 5 2 0 2 5 0 30 November 6 2 3 0 0 2 1 0 14 December 8 6 2 0 0 4 5 0 25
Cars Financed by Standard Chartered in Sept.2004

2 3 0 6 M800 Omni Zen Esteem Baleno Wagon R Alto Versa
0 0 4 4
Graph 6b, 6c and 6d
69
Cars financed by Standard Chartered in Oct.2004 0 0 2 0 2 5 6 5 10 M 800 Omni Zen Esteem Baleno Wagon R Alto Versa
Cars financed by Standard Chartered in Nov.2004

0 0 0 2 1 6 M 800 Omni Zen Esteem Baleno 3 2 Wagon R Alto Versa
Cars financed by Standard Chartered in Dec.2004

0 5 8 M 800 Omni Zen Esteem 4 0 0 2 6 Baleno Wagon R Alto Versa
70
MANDOVI MOTORS PVT. LTD. Comparison of No. of cars financed Company wise Table 7 ICICI Bank Month/MODEL M 800 Omni Zen Esteem Baleno Wagon R Alto Versa Total September 11 2 7 7 0 9 4 0 40 October 4 4 4 2 0 8 7 0 29 November 9 4 5 0 0 7 4 1 30 December 8 2 9 1 0 6 6 0 32
Graph 7a
Cars fin an ce d b y ICICI in Se p t.2004

4 9 0 11 M 80 0 Om n i Zen Es te em Bale no 0 7 7
Graph -7b, 7c and 7d
W ag on R Alto Vers a
71
Cars financed by ICICI in Oct.2004

7 0 4 4
M 800 Omni Zen Esteem Baleno
4 0 2
Wagon R Alto Versa
Car financed by ICICI in Nov.2004

M 800 4 1 Omni 9 Zen Esteem 7 0 5 4 Baleno Wagon R Alto Versa
Cars financed by ICICI in Dec.2004

0 M 800 6 8 Omni Zen Esteem 6 0 1 9 2 Baleno Wagon R Alto Versa
72
MANDOVI MOTORS PVT. LTD. Comparison of No. Of cars financed-Company wise Table 8 ABN Amro Month/MODEL M 800 Omni Zen Esteem Baleno Wagon R Alto Versa Total September 9 5 7 0 0 0 3 0 24 October 5 1 3 1 0 0 3 0 13 Graph 8a November 3 4 0 0 1 0 0 0 8 December 3 3 0 0 0 1 1 0 8
Cars financed by ABN Amro in Dec.2004

1 1 0 0 0
Graph 8b, 8c and 8d
M 800 Omni Zen
0 3
Alto Versa
73
Cars finance d by ABN Amro in Oct.2004 0 0 0 0 1 3 1 3 5 M 800 Omni Zen Esteem Baleno Wagon R Alto Versa
Cars financed by ABN Amro in Nov.2004

0 0 M 800 1 0 3 Omni Zen Esteem Baleno 4 Wagon R Alto Versa
Cars financed by ABN Amro in Dec.2004

0 1 1 0 0 0 3 3 M 800 Omni Zen Esteem Baleno Wagon R Alto Versa
74
MANDOVI MOTORS PVT. LTD. Comparison of No. of cars financed-Company wise Table-9 Hong Kong Bank Month/MODEL M 800 Omni Zen Esteem Baleno Wagon R Alto Versa Total September 6 1 0 0 0 1 3 1 12 October 10 5 3 0 0 4 4 0 26 November 8 4 0 0 0 1 1 0 14 December 6 2 3 0 0 3 3 0 17
Graph 9a
C a rs fin an ced b y H o n g k o n g B a n k in S ep t.20 04

M 800 1 3 6 1 0 1 O mn i Ze n Este e m Ba le n o Wagon R Alto Ve rsa
Graph 9b, 9c and 9d
75
cars financed by Hongkong Bank in Oct.2004

0 0 4 4 0 0 3 5 10 M 800 Omni Zen Esteem Baleno Wagon R Alto Versa
Cars financed by Hongkong Bank in Nov.2004 0 M 800 0 0 1 Omni 1 0 Zen Esteem 4 8 Baleno Wagon R Alto Versa
Cars financed by Hongkong Bank in Dec.2004 M 800

0 Omni Zen 6 Esteem Baleno 0 Wagon R 3 2 Alto Versa 3
76
Comparison of performance of Mandovi Motors (P) Ltd. During 2003 and 2004 in terms of car sales
Table 10 Year/Month 2004 2003
January February March April May June July August September October November December Total
327 368 337 172 243 243 181 256 269 235 207 258 3,121
304 368 486 258 379 379 348 355 421 233 256 362 4,173
77
MANDOVI MOTORS PVT. LTD. Graph 10
Comparison of Sales of Mandovi Motors

No. of Cars 600 500 400 300 200 100 0
Ju l A y S ugu ep s te t m be O r ct N obe ov em r D be ec em r be r
Hence share of 78
nu a F eb ry ru ar y M ar ch
Ja
The main reason for drop in sales in 2004 as compared to 2003 is because of two new dealers being appointed for Bangalore city. The two new dealers, Bimal Motors and Pratham Motors started operations in June 2002. Mondovi Motors in total car sales has seen a drop in 2004 compared to 2003. The drop in sales after the month of September in both the year is because of the half-year closing.
pr il M ay Ju ne
Months
MANDOVI MOTORS PVT. LTD. Table 11 Month/Model M 800 Omni Zen Esteem Baleno Wagon R Alto Versa Total Dec-04 78 56 42 6 1 42 33 0 258 Graph 11 Dec-03 155 113 50 10 0 17 10 6 362
C om parision of car sales at M andovi M otors 180 160 140 120 100 80 60 40 20 0
m no 0 O m ni n 0 Z e e le 8 st e M a W a
155
113
50 10 17 0
R o A lto n
D ec-04 D ec-03 10
rs a e V
79
Bite The Bullet And Blow Your Balloon

You are a well-heeled executive in a leading firm and you are a proud owner of a four-year-old Maruti 800 AC. But recently you have been toying with the idea of replacing your Zen with a bigger Ford Ikon. Obviously you have been influenced by the recent spate of advertisements, which quote the ratings given by leading auto magazines. But there is one small problem. You are not sure whether you can afford an Ikon with your present salary. But then the new breeds of car financiers know their jobs well. They will structure the loan package in such a manner that you will pay a lower sum as installments and at the end of a fixed period pay a lump sum amount. This they call the 'balloon' scheme of car financing. Under this scheme, the financier funds between 50%-85% of the cost of the vehicle depending on your credit worthiness. You will have to pay a monthly EMI for a period of two to five years. The rest can be paid at the end of the above stated period. The only catch is that the scheme will allow you to hold a maximum of up to 25% of the total cost of the car. As of now only Ford Credit India (FCI) and ICICI are the two finance companies to have offered this option. Under their scheme, you have to pay the same initial payment and equated monthly installments (EMI), as you would have done for a Zen or Santro. At the end of the third year, you would have to make good the EMI differential for the Ford Ikon. As is apparent, the scheme is based on the premise that by the end of three years, the buyer is expected to see an increase in his/her emoluments. There is another variant of the scheme, which aims to serve owners of a Zen or a Santro. Ford Credit India will take upon it to evaluate the used car's value and adjust it as the down payment for the Ikon. If the used car is financed, FCI will retire the old loan and provide finance for the Ikon.
80
MANDOVI MOTORS PVT. LTD. But it may so happen that the expected rise in salary does not materialize at all or have risen beyond their expectations. Then what happens? According to Ford Credit, they will give the option to the customer to turn in their old vehicles at the end of a three-year period and allow them to upgrade to a new model from the Ford stable. The residual value of the turned in Ikon will be adjusted towards the balloon payment. Another new invention is the 'bullet scheme. Here the customer pays equal installments throughout the year and at the end of a certain pre-defined period pays an incremental or bonus amount.
81
FINDINGS
There are 402 Key Players in the automobile market with an Investment of US $ 2.3 billion. India is the 3rd largest car market in Asia, surpassing China in the process. Car market is expected to grow at 9.5%. The auto finance industry comprises of mainly NBFC'S but also has a few nationalized banks as well as foreign banks operating. At present, 75- 80 % of the cars bought in the country are bought through various car-financing schemes, Financing schemes varies from Margin Money Scheme, Installment in Advance Scheme, Stepped Schemes and as varying as Balloon Schemes, No Income Schemes etc.
All financiers, before approving a scheme seek documents towards, Proof of Identity & Signature Proof of Residence Income Proof Proof of Office and Years in Business / Service
The interest rates differ between various car models of the same manufacturer, depending on the model the company wants to promote.
Two individuals availing a finance scheme from the same source can get different deals. So negotiations go a long way in getting better deals. On an average 72% of Maruti cars sold at Mandovi Motors have been financed.
82
MANDOVI MOTORS PVT. LTD. Maruti 800 is still the most preferred car followed by Omni and Zen among other models. 35% of the total cars sold is that of M 800. On an individual basis, ICICI Bank has financed maximum number of Maruti cars followed by Standard Chartered and Hong Kong Bank. Nationalized banks put together have also financed maximum number of cars. The number of cars sold by Mandovi Motors in the year 2002 has drastically come down as compared to 2001.
83
CONCLUSION
Clearly, it seems, that finance companies will not hold anything back when it comes to value added schemes. Here the customer is the king and the race is on to woo him/her. And why not'7 Car sales have grown by a whopping 56% in the last fiscal with the mid-sized car segment getting a new lease of life thanks to the rising income profile, especially in urban areas and growing popularity of finance schemes. Prices of cars having increased in recent months (due to Euro compliance and rise in input costs) and are expected to go up further due to a rise in sales tax rates. This will provide further fillip to finance schemes and may be in the not so distant future, car buying could become more exciting and affordable.
Here's a secret. In today's world, the consumer is King. Two individuals availing a finance scheme from the same source can get different deals. So negotiations can go a long way to get you better deals and the maximum bang for your buck.
Happy Financing!
84
SUGGESTIONS
Budgeting is very important because the costs associated with owning or
leasing a vehicle don't end when the vehicle is delivered or the loan is paid off. In fact, possession is just one phase of the car cost-cycle. Costs, including repair and maintenance, gas, insurance, plates, taxes, and registration, can all add up very quickly. The key common sense issue of affordability must be examined both at the time of purchase and over the life of the vehicle. First decide on the car you want to purchase keeping in mind the budget for
getting a financed car, the price, type (petrol/diesel), expected maintenance costs, etc. You might be vacillating regarding which specific car to buy, but you will still have a broad idea as to the kind of the car you intend to possess. Decide whether you want to lease or hire purchase the car. In a lease, the car belongs to the financier. The financier passes on depreciation benefits to you by charging you with a low rate of interest. You get tax benefits in the form that, the lease amount, cost of maintenance and insurance can be claimed as expense. In hire purchase, you can take the benefit of tax-shield on depreciation as you own the car. Further, the interest paid on the loan, road tax, insurance and repairs are deductible from the income for income-tax calculations. If you are an individual, lease or hire purchase gives no tax benefits.
Find a loan that suits you after deciding between leasing and hire purchase.
A loan should fit your pocket and the term you wish to take it for. You will need to get quotes of all the finance companies and map them according to your requirements. Compare the rates of different finance companies on parameters such as
interest rates, pre-payment clause, upfront margin to be paid, etc. Things you need to check for 85
MANDOVI MOTORS PVT. LTD. a. What the monthly loan payment is, b. What interest rate that translates into, c. The duration of the loan, d. The percentage of the car price you can take as a loan, e. Other incentives or discounts that the finance companies offer. Get your documentation in order. No matter who lends you the money, you
need to have some basic documents ready a. Proof of Income b. Proof of Residence c Banking History d. Photographs e. Proof of Identity f. Signature Verification from the Bank
Ask questions and read the documents before signing them. Try to get a
copy of the Agreement or Contract before you get into one. Understanding the important clauses within the agreement can help you avoid a lot of trouble in future. Most banks and finance companies market their car finance schemes through agents. Try and authenticate an agent's claim from the officials of the bank or the finance company. You can get all ambiguities resolved by speaking to the staff of the bank or finance company, in whose favor you shall be drawing the post-dated cheques towards repayment of your car finance contract.
Most lenders, including foreign banks, are going to make you sign at least 20-30 pages of documents. And if you skip even one page, the loan will not be disbursed. In case you are uncomfortable with the terms, simply don't take the loan from that lender.
86
MANDOVI MOTORS PVT. LTD. Always READ the loan application and offer documents and look for the hooks. Here are some typical pointers Check if there is a pre-payment penalty. If there is one, find out which has the lowest rate. LOOK FOR THE LONGEST GRACE PERIODS. LOOK FOR LOANS THAT GIVE YOU THE MAXIMUM NUMBER OF
DAYS TO PAY BACK THE DUE AMOUNT WITHOUT AN INTEREST CHARGE.
period.
Find out whether the interest remains constant through the contract
Read the fine print carefully. Remember, if there is a problem later, what is written is what counts. What the marketing person tells you verbally carries no weight.
Sign an Agreement/Contract in which the blanks have been filled up. Signing agreements with blanks does not work favorably for you.
The documents usually contained in the agreement booklet are Hire-Purchase Agreement Schedule of Charges, Deposits and Rates Irrevocable Power of Attorney Promissory Note FORM 20 for Registration of Vehicle Certificate of Inspection FORM 26 for Intimation of Loss or Destruction of Certificate of Registration and Application of a Duplicate Certificate
FORM 27 for assignment of new registration mark on removal of the vehicle to another state
87
MANDOVI MOTORS PVT. LTD. FORM 28 for "No-Objection Certificate" and grant of certificate . FORM 29 Form of Notice to Transfer of Ownership of Vehicle . FORM 30 Report of Transfer of Ownership of a Vehicle FORM 34 Application for making an entry of an agreement Purchase/Lease/Hypothecation subsequent to Registration FORM 35 Notice of Termination of an Agreement of HirePurchase/Lease/Hypothecation Dealer Authorization Letter Signature Verification Disbursement Memo of Hire-
Give the cheque of Margin Money, processing and insurance after signing
the documents. Take the delivery of the car directly from the car dealer. Pay your loans regularly. Ask for the interest computation sheet or the loan statement at the end of the year. Verify the interest rate charged. Get the bank to release the lien on your car after payment of all the
installments. There is no law or regulation that requires lenders to use a standard format
to disclose all his or her interest charges and fees. That gives lenders the opportunity to play around with the way they sell you the loan. The loan could turn out to be very expensive if you added up the processing charges and the dates on which you have to pay back your installments. Get the lender to give you all the charges, obvious and hidden, in writing, with a statement that there are no other charges. Most lenders may hesitate to give you anything in writing, so don't just believe the lender, talk to a few friends and relatives who may have taken a similar loan from the same lender and see what their experience has been.
88
BIBLIOGRAPHY Company Brochures, Manuals, and Annual reports. Magazines: Overdrive Auto India Auto car
WEBSITES:
www.auto.Indiamart.com www.marutiudvog.com www.automandi.com www.automobile.com www.indiainfoline.com
89
ANNEXURE QUESTIONNAIRE -RECENT TRENDS IN CAR FINANCE"

CAR FINANCING COMPANY:
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ADDRESS:
NAME OF THE PERSON: ---------------------------------------------------------------
DESIGNATION:
---------------------------------------------------------------------
1.What are the various purposes for which you provide car loans? a) Purchase of new car b) Purchase of used car c) Any other (specify) 2.Please name the schemes of your car loans.
3.What is the minimum and maximum amount of loan offered under each? Minimum Amt Maximum Amt.
-------------------------------------------------------------------------------------------------4.Which is your main focus area? ---------------------------------------------------------------------------------------------5.what service charge are levied by you ---------------------------------------------------------------------------------------------6. Do you charge penalty for prepayment of loan? -----------------------------------------------------------------------------------------------
7. Can you briefly outline your core competencies?

90
8. How many DSA's are there and with whom are they tied up?
9. Who is doing well and what are there set up?
10. What percentage (%) of cars is financed thro' DSA's?
11.Which of the following aspects do you think makes your car finance more attractive? a) Interest rates b) Flexible scheme c) Quality and personalized service d) Location e) Others (Specify)
12. What is the quantum of loan disbursed every month?
13. How many cars are financed every month?
14. Vat in your opinion gives your bank/company the 'competitive edge' as compared to other banks providing car finance?
15. Mention the Value added services' offered to your existing customers/new customers.
91
16. Give your opinion regarding the current developments in the car finance sector and also the future trends in this sector. 17. Do you think reduction of interest rates is the only way to attract customers in present business scenario? 18. What are the other strategies adopted to capture the market apart from reduction of interest rates? 19. Which strategy of your car financing has made you a 'pioneer1 in the market? 20. Do you provide the following kind of services? a) b) c) Free personal accident insurance 48 hour loan sanction Online service
21. What charges are levied for rescheduling of loans? 22. Is there any discount available for the customer holding a credit card of pour bank?
23. Since this market is full with similar products/services, is there any product innovation-taking place in your car financing?
24. What is your current percentage (%) of market share?
25. Anything you would like to add?
92

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MANDOVI MOTORS PVT. LTD.

MANDOVI MOTORS PVT. LTD.

Car market to grow at 9.5%

Indian Automobile Sector

Indian Automobile Industry Performance

MANDOVI MOTORS PVT. LTD.

MANDOVI MOTORS PVT. LTD.

MANDOVI MOTORS PVT. LTD.

Vehicles Sales (in '00000)

Passenger Car Sales

DEC-04 30,905 8,652 6,524 3,060 1,756 1,564 906 798 64

DEC-05 29,562 6,090 3,666 601 2,099 1,005 653 693 41

% 4.5 42.1 78.0 409.2 -16.3 55.6 38.7 15.2 56.1

MANDOVI MOTORS PVT. LTD.

The Passenger Car Market

MANDOVI MOTORS PVT. LTD.

Automobile Finance in India

MANDOVI MOTORS PVT. LTD.

Advantages of Equated Monthly Installments 1. Interest is distributed over loan period

MANDOVI MOTORS PVT. LTD.

MANDOVI MOTORS PVT. LTD.

INTEREST RATE CHART

MANDOVI MOTORS PVT. LTD.

in the passenger car market, Maruti

MANDOVI MOTORS PVT. LTD. Mr Osamu Suzuki MrVKMalhotra

Bangalore is dedicated to the Maruti operations.

Dedicated and motivated team of professional branches.

Highest sale of car accessories in the country.

7. New centrally located state-of-the art showroom at Bangalore.

consistently awarded from Maruti for the last four years.

vehicles fully tools,

serviced equipped etc.

over 500 people.

MANDOVI MOTORS PVT. LTD.

Maruti Suzuki Versa

MANDOVI MOTORS PVT. LTD.

MANDOVI MOTORS PVT. LTD.

Hire Purchase You Financier You Interest paid

The finance scheme product range

address and a few other basic details. Sometimes, if applicable,

MANDOVI MOTORS PVT. LTD.

Analysis of the car financing companies in terms of their offerings

Scheme Name Locations Joint Application Eligibility

Scheme Name Locations Joint Application

MANDOVI MOTORS PVT. LTD.

Comparison of Cars Sold With Cars Fiananced- M 800

Oct. Month Cars Sold

MANDOVI MOTORS PVT. LTD. Graph- 1b,1c and 1d

Comparison of Cars Sold With Cars FianancedOmni

Oct. Months Cars Sold

Comparison of Cars Sold With Cars Fiananced- Zen

Oct. Months Cars Sold

Comparison of Cars Sold With Cars FianancedEsteem

MANDOVI MOTORS PVT. LTD. Graph- 1e, 1f and 1g 1d

Comparison of Cars Sold With Cars FianancedBaleno

Oct. Months Cars Sold

Comparison of Cars Sold With Cars Fiananced- Alto

Oct. Months Cars Sold

Comparison of Cars Sold With Cars FianancedVersa

MANDOVI MOTORS PVT. LTD.

Comparison of Cars Sold With Cars FianancedWagon R

Comparison of Total Cars Sold With Total Cars Financed