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Home > Business > Business Headline > Report

Maruti in deal with SBI to push sales

Fakir Chand in Bangalore | July 16, 2003 19:52 IST

Maruti Udyog Ltd, India's largest car-maker, is set to penetrate the domestic market riding high on its auto financing arrangement with the State Bank of India and its associate banks across the country.

Buoyed by a 150 per cent growth the SBI witnessed in financing its customers with car loans in the first three months after signing the deal, the auto major is gearing up to extend the facility to its entire dealer network and authorised service centers.

Maruti Managing Director Jagdish Khattar told the media in Bangalore on Wednesday that car financing had grown phenomenally in India over the last five years, registering a 25 per cent increase.

"Five years ago, about 50 per cent of the total cars purchased were on auto financing. With the easy availability of finance on much lower interest rates, 75 per cent of the total cars bought currently are financed by various banks and non-banking financial companies," Khattar stated.

Though Maruti had entered into joint ventures with Countrywide, Citibank, and ICICI Bank for auto finance earlier, Khattar declared that the company would not sign up with any other public sector bank in the light of its exclusive arrangement with the SBI group, including its seven associate banks.

"Car finance is still confined to about 50-60 cities spawning the country. The potential for its growth is huge. We are looking at making auto finance available in all the cities and towns where we have 161 dealers and about 900 authorised service stations, cutting across various states.

This apart, our tie-up with the SBI group enables us to extend the auto finance scheme throughout the country from the group's 13,581 branches, including 4,548 branches of its six associate banks," Khattar affirmed.

After entering into an MoU with the State Bank of Patiala recently, Maruti tied up with the Bangalore-based State Bank of Mysore in Bangalore on Wednesday for extending the car financing in Karnataka, where the latter has about 550 branches.

Next week, the company is tying up with the State Bank of Bikaner & Jaipur on July 22 and the State Bank of Hyderabad on July 24. These will be followed up with the State Bank of Indore, the State Bank of Saurashtra, and the State Bank of Travancore in due course.

The SBI group is offering auto loans at 10.25 per cent interest rate to all Maruti customers for its new as well as second-hand cars (true value scheme). The rate is claimed to be the lowest in the country for auto finance.

"As against 12 cars per 1000 households in Sri Lanka and Pakistan, there are only 6 cars per 1000 households in India, with over a billion population. India can do as much as these two neighboring countries with much less population," Khattar revealed, quoting a survey.

Unlike in the past, the automobile industry in India is poised to grow rapidly, thanks to three trigger points in vogue, viz., an improved road infrastructure, easy availability of finance, and reduced taxation or duties.

With an installed production capacity of 350,000 units per annum, and a record sales of 330,000 cars of various models during the fiscal year 2002-03, Maruti plans to organize car loan melas in association with the SBI group to push its sales exponentially, especially of its flagship model 800.

"The entire financing of two-wheelers and passenger cars are confined to 50-60 cities currently. There are hundreds of cities and towns to be covered by the finance companies and banks. Even the auto firms have a long way to go for penetrating the Indian market in the countryside," Khattar added.

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