Car loan in india

Last week, in an interview with a television channel, ICICI Bank Ltd's joint managing director and chief financial officer Chanda Kochhar said the bank is not looking at any of the sick financial intermediaries overseas for possible acquisition, even though there have been offers.

"Just because something comes cheap, you don't necessarily have to buy it," she said. "You need to see the quality of assets. There are many challenges and we don't need to go for these challenges. We are happy to take those risks that we understand." This is a rather dramatic statement from a bank that so far believed in the culture of high growth, high delivery and high performance.
Investors rushed to dump ICICI's stock last week, fearing it has huge exposure to Lehman Brothers Holdings Inc., which filed for Chapter 11 bankruptcy in the US. In three trading days, ICICI Bank lost some 14% of its value. Since the beginning of the year, its market value has been eroded by more than 49% while the Sensex, India's most-tracked equity index, has lost much less, about 31%, and Bankex, the banking industry index, 38%. Investors' fears seemed misplaced as ICICI Bank's exposure to Lehman is relatively minuscule, but that did not put a lid on rumours of bank directors selling their stocks and depositors withdrawing money.

ICICI Bank was created in 2002 after the 1955-born development financial institution ICICI was merged with its subsidiary, floated in 1994 when the Indian central bank gave licences to the first set of so-called new private banks.

The merger, which created India's first universal bank, or a one-stop shop to meet all financial needs of consumers, was a compulsion for the group as the development financial institution lost its relevance in a liberalized economy and was fast crumbling under huge asset-liability mismatches. As the government was no longer doling out subsidized funds to such institutions, ICICI was borrowing short and lending long for projects. The rising car loan interest rates and tight liquidity that hit the financial system in the mid-1990s also took its toll on the quality of assets. Along with growing asset-liability mismatches, the piling of stressed assets was also a big concern for K.V. Kamath, who took over as managing director and chief executive officer in May 1996, replacing Narayan Vaghul.
In the run-up to the creation of the universal bank, Kamath stitched a string of mergers to build the scale. First, SCICI Ltd, a shipping finance firm within the group, was merged with ICICI. This was followed by mergers of two non-banking finance firms with it, Anagram Finance Ltd and ITC Classic Ltd. Bank of Madura, a south-based old private bank with substantial exposure to farm loans, was also merged with ICICI. Recently, ICICI Bank acquired a Russian bank, Investitsionno-Kreditny Bank, with a small asset base, and an equally small domestic bank, Sangli Bank Ltd.

These mergers have helped ICICI build the scale to some extent, but not the infrastructure that a bank needs to support the scale. It employed thousands of agents to sell mortgages, car and consumer loans, aggressively tapping the rising disposable incomes in the world's second fastest growing major economy, but these cannot garner deposits.
In the absence of retail deposits, the bank's dependence on high-cost wholesale deposits has grown, bringing down its net interest margin or the spread between the cost of funds and its earnings on such funds. Its low net interest margin is partly compensated by ICICI Bank's high fee income, about 40% of its total income, the highest among Indian banks and comparable with global banks. But to raise its fee income it has exposed itself to complicated, structured derivative products both in India and overseas.

The high-growth business model has also forced it to raise equity from the market frequently. This has a chain effect and the bank is always under pressure to keep the growth momentum as otherwise the return on its expanding equity shrinks. Between 2004 and 2007, its balance sheet has grown at more than 40% every year. It has also aggressively expanded its overseas presence in past few years, setting up shop in 18 countries and building $25 billion (Rs1.1 trillion) of assets, roughly one-fourth of its book.

This business model worked wonderfully in a booming economy but the scenario has changed. It cannot push growth overseas because of global risk aversion following the subprime crisis that is rocking the financial world. With rising interest rates and tightening liquidity, the loan growth on home turf is also slowing and the quality of assets is deteriorating. Higher non-performing assets, or NPAs, call for higher provisioning, and that affects profitability.
To be sure, ICICI Bank is well capitalized and it does not have any liquidity problem. But it needs to get rid of its obsession for growth in a slowing economy.

The business model needs to change from growth to consolidation. The share of retail assets of the bank in its overall asset base that was 65% a year ago has already come down to 52% and will shrink further. Similarly, its portfolio of high-cost wholesale deposits is also coming down with increasing focus on low-cost current and savings accounts. It has also got rid of its entire $700 million exposure to credit derivatives such as credit defaults swaps, credit-linked notes and collateralized debt obligations in its overseas books.

But the most important outcome of the mini crisis is ICICI Bank's realization that it doesn't need to embrace risks that it does not understand. For India's largest private sector bank, it signifies a big cultural shift.

Hyundai Motor India Limited plans to launch its new 800cc car in India in next three to four years. Research teams from Hyundai in Hyderabad and Chennai shall jointly work on the new car concept that would compete with Maruti's 800cc car directly in the small car segment.

"We are working on a 800cc car which will be similar to the Maruti 800. The car is under joint development in our Indian and Korean R&D facilities. The ultimate desire is to become India's largest car maker," said Hyundai Motor India MD & CEO H S Lheem.

Maruti Suzuki currently leads the small car segment in India with Hyundai trailing at the second position. HMIL plans to expand its market share and occupy larger market share in the country. It has set a target of 22 percent market share in the current year.

"The small car market is going strong and will continue to do so. Our small car will be meant for both the domestic and the export market. However, we neither have the technology nor any plan to fight the Nano," said Lheem.

Hyundai also plans to bring its new model i20 in India by the year end. The new model shall be launched in Paris Auto Show in October this year. Hyundai currently sells 20,000 i10 per month which records as the highest selling model for the company. HMIL has already sold 2 lakh units this year and exported more than one lakh cars.

Most car buyers, when applying for a loan, grapple with the question of whether they should opt for a fixed or a floating rate option.

This question assumes importance as car loans have a lower tenure than home loans. Typically, home loans have a 15-20 year tenures, during which the borrower will go through a few rate cycles. If the interest rates rise in the interim, their equated monthly instalments (EMIs) are likely to shoot up.

For instance, home loan floating rates are over 11.5 per cent for most banks currently. However, three to four years ago, they were as low as 7 per cent. In other words, over a long time the overall impact on the finances would, more or less be balanced.

Car loans, on an average, are for three to four years (Maximum tenure: 7 years). That means that a person mostly would find it difficult to gauge that whether they are entering a rising or a falling cycle.

In the past one year, many public sector banks, including State Bank of India, Bank of India and Bank of Baroda have started offering floating rates on auto loans. Private sector lenders too are beginning to offer floating rate loans. ICICI Bank, which was offering both floating and fixed options way back in September 2007, is planning to offer only floating rate loans from August 25.

Said N R Narayan, head of vehicle loans, ICICI Bank, "Earlier, we were planning to increase over fixed and floating rates by 50 basis points each. However, now we feel that the interest rate cycle has almost peaked. For the customer, it will make a lot of sense to get into floating rate auto loans." Expecting another rate hike in the coming six months, he said the interest rates would move southwards after that. You may check all the latest news and updated rates on icici car loan here on just one click.

Agreed Govind Pathak, director, Acorn Wealth, a financial planning firm. "Six months ago, the answer would have been definitely fixed because of the uncertainty in the interest rate scenario. Now, floating rate looks like a better option," he said. Of course, for the borrower who is taking the loan for the short-term like six months or one year, fixed is still the best option. For a three-year plus tenure, floating should be the choice.

However, though this is the immediate solution as far as the choosing the interest rate goes, auto buyers in the future will have to carefully gauge the scenario before taking a call on the right option. Have you heard of SBI car loan rates they have slashed and also with many repayment options available.

Banks like Punjab National Bank, Allahabad Bank, Oriental Bank of Commerce offer only fixed rates.

India, like many other economies, has embarked on a long, difficult road to check runaway prices. It's now evident that policymakers will hike interest rates till it hurts and pulls down demand. The Reserve Bank of India (RBI) as well as the government are willing to sacrifice a bit of growth to douse inflation - an issue that has captured the collective imagination. Nowadays it has because to easy buy a car because many banks are offering car loan india at very affordable rates so check them out to grab your bank.

On Tuesday, RBI governor YV Reddy hiked the benchmark short-term rate by 50 basis points, about 25 bps more than what the market had expected. Bonds and equities reacted sharply, and the Sensex crashed 557 points.

Soon, home loan seekers and corporate borrowers will feel the pinch since borrowing money will now be far more costlier. RBI has not only raised the benchmark repo rate - the rate at which banks borrow from RBI - from 8.5% to 9% with immediate effect, but has also hiked the cash reserve ratio (CRR) for banks by 25 bps - a measure that will drain Rs 9,000 crore from the banking system.

Given the outright hawkish policy stance, it's clear that Mr Reddy will not hesitate to take more policy actions if he thinks that inflationary expectations have not been adequately checked. However, there is a growing perception that the Indian economy, in its current stage, may be better prepared than before to absorb rate shocks. Thus, the price it will have to pay would be smaller than feared. Addressing the media, Mr Reddy said RBI's "approach to address demand pressures would be calm and calculated to avoid exaggerated bearishness."

The money market is reflecting interest rates at levels last seen in 1999, a period characterised by a deep slowdown. Some of the more pessimistic analysts predict a bear market of indefinite length and a growth in the region of 7%, though the latter is still high by world standards.

RBI, however, still expects an 8% growth. The optimistic view is that if RBI is able to bring down inflation to 7% by the end of the fiscal, which is its target, rates may start coming down. However, some forecasts peg inflation as high as 15% by October, which would surely mean higher rates.

An all new small car from the Volkswagen stable will roll of its new manufacturing facility in Chakan in Pune in 2010.

It will be a new design, specially made for India and would be under Volkswagen brand, Group's India President and managing director Joerg Mueller told newsmen here at the Indian launch of the popular Volkeswagen model -- Jetta.

The new plant coming up at the sprawling 230 hectare in Chakan is being built at an investment of 410 million Euros and was expected to be ready for production in the first half of 2009.

Mueller said that the small car would have a high local content of components.

The group, which notched up an impressive 69 per cent growth between January and June this year selling 10,366 cars, aimed to touch 20,000 cars by December end. This would include 1,200 units of Jetta, which was unveiled in India after 29 years of success globally.

Jetta would be assembled at the Aurangabad Plant, where Skoda model was being built, with the parts coming from the Mexican plant of Volkswagen.

Sorry, here is some bad news for those with house, car or any loans from banks. Interest rates have just gone up. Therefore, the EMI on car loan will either become heftier or will have to be paid out for a longer period. On Thursday, the country's premier bank, State Bank of India, and Union Bank of India increased the rate by 50 basis points.

This means SBI's prime lending rate will be 12.75% and that of UBI will be 13.25%. The other banks are likely to follow suit very soon - in every likelihood before the month is over. Apart from your EMI nightmare lengthening, the rate rise spells bad news for the housing and auto companies, as well as those making consumer durables like TV, washing machines and fridges as the high interest rates are expected to dampen consumers' enthusiasm to buy.

The rate rise will not only increase the cost of new loans, but will also make all the existing floating rate loans such as home loans, retail loans and consumer loans costlier by half a percentage point.

An increase in the interest rate by half a percentage point on a 20-year home loan leads to an EMI increase of about 4%. In the last three years, home loans have soared from 7.5% to 11.5%. This has led to increase in the EMI by almost 35%, hitting the real-estate sector badly.

Not just that, all the corporate loans will now become costlier. SBI CFO Askok Mukand, however, hoped that the credit offtake would continue to be strong. He said that credit growth would be in the range of 20% to 21% in the current financial year.

Following SBI's hike in interest rates, other banks are likely to increase the rates soon. The CMD of a public sector bank said that the repo rate announced by RBI is a kind of a direction from the central bank to the banks to increase their lending rates.

He said that the immediate effect of this is that the interest rate on short-term funds will go up. Such an increase in the interest rate, it is believed, will help contain the demand for goods and services, which in turn, will help in moderating inflation.

Public sector banks like Punjab National Bank, Union Bank of India and Bank of Baroda are likely to announce the rate increase before July 1, 2008. A top banker said that the new rates would kick in from July. He said that the rate rise will be in the range of 50 basis points to 100 basis points. Small banks will increase the rate by around one percentage point as RBI's tight money policy is affecting them more.

Other private sector banks like HDFC Bank had raised their rates even before RBI increased its policy rate on Tuesday by 25 basis points to 15.25%. A senior HDFC Bank official said that following the increase in the CRR and repo rate by RBI, the bank will again review its interest rates soon. The country's largest private sector bank, ICICI Bank, will also review its PLR soon.

Private sector banks, a senior banker said, are likely to increase their rates more sharply than large public sector banks. He said that the dependence of private sector banks on overnight borrowing is much higher. Therefore, the tight money policy followed by RBI would affect them more.

Domestic auto sales showed resilience for the second consecutive month in the current fiscal as most segments reported growth, according to the data released by the Society of Indian Automobile Manufacturers on Tuesday.

The two-wheeler industry, which was the worst hit in the last financial year, seems to have emerged out of its sluggish sales period. Motorcycles sales rose 7 per cent last month as compared with the same period in the previous financial year.

Even as the availability of two-wheeler finance remained tight, Hero Honda, the leading bike maker superseded the industry growth by recording a 10.33 per cent surge in sales at 2,97,387 units. In contrast, Bajaj sales remained stagnant at 1,30,068 units. An increase in demand from women drivers and a relatively less dependent segment on finance, scooters and scooterettes sales rose 6.36 per cent at 97,905 units.

"The squeeze in finance has led to more Hero Honda customers opting for cash purchases than on loan. So this year should be better than last year," said a city based Hero Honda dealer. Moreover, with the hike in fuel prices, consumers would prefer using a two-wheeler for shorter distances, he added. Now there's no need to worry about car loan in india just visit here to find the exciting facts and interest rates offered by all major banks.

Commercial vehicles also recorded a healthy increase in sales. The light commercial vehicle segment grew 6.83 per cent at 16,628 units. Purchases of medium and heavy commercial vehicles recorded 5.46 per cent increase to 18,666 units.

Despite the encouraging sales, the industry association has given a cautious outlook. "Sales have been decent in the first two months of the fiscal. However, due to high interest rates, restricted finance for vehicle purchases, spiralling prices including the recent fuel price hike would make the coming months challenging for the industry," said Mr Dilip Chenoy, Director General, SIAM.

Japan's third largest car maker Nissan, where Renault holds 44 per cent in the company, will churn out three models based on a single platform from its manufacturing base in Chennai in 2010.

The car will be sold in five countries categorized by the company as leading competitive countries (LCC). One of the first few countries where the car, based on the A platform, will be produced, will include India and Thailand.

All models will capitalise on high cost competitiveness thanks to high levels of localisation through easy sourcing of components. The company is not present in such a category of low cost cars, and it believes that there will be a lot of room for improvement.

The company will also set up a technical center in Chennai, in partnership with Renault, where they are also setting up a 4,00,000 units a year manufacturing facility for passenger cars. Together, the Renault-Nissan alliance is the fifth largest automaker worldwide.

Nissan is expecting sales volume to be more than 2,00,000 units in financial year 2012 from India. The target will be achieved through its alliances with Bajaj, for the small car, with Ashok Leyland for commercial vehicles, with Renault for passenger cars, with Hover for sales, marketing and dealer development support.

The company also has a contract manufacturing alliance with Maruti Suzuki for export of about 50,000 units per year of A-segment vehicles to Europe.

"In India, we have made a strategic decision to work with partners to speed our entry into the market and to leverage local expertise, building on Nissan's proven track record of success with collaborative relationships", said Ghosn in his speech.

The company believes that the scope of growth in countries like India and China are immense after considering the penetration of vehicles into the markets is less than 50 per 1,000 nationals. US has about 800 vehicles, while Germany, Japan, UK and France has about 600 vehicles per 1,000 people. In 2007, the total industry volume globally increased 6.1 per cent even though Western Europe was flat, the US market was down 3.5 per cent and Japan was down 5.3 per cent.

Ford is expected to complete the sale of its Land Rover and Jaguar marques to the Indian conglomerate Tata within a few days.

The two sides are understood to be keen to complete the deal in time to meet Ford's previous indications that the disposal would take place early in 2008.

Neither side has put a price on the marques. Initial estimates suggested that Ford would expect to receive between $1.3bn (£660m) and $1.5bn, though the recent success of Land Rover, on the back of new model launches, may have pushed the price tag closer to $2bn.

This month there were unconfirmed reports that Tata had signed a one-year bridging loan for $3bn with Citigroup and JPMorgan.

Ford has not revealed the individual financial performances of Jaguar and Land Rover. Both are part of its Premier Automotive Group, which made a profit of $504m last year. Land Rover has enjoyed three years of record sales and is thought to be highly profitable despite the weakness of the dollar, which has hindered both marques in the important US market.

Industry sources say the key issue that has prolonged the negotiations is not price but a complex set of supply agreements that form part of the deal.

Ford is a key supplier to its two subsidiaries and is keen to retain that position after the sale to Tata. There has been speculation that Ford would seek to keep a stake in Jaguar and Land Rover after the sale but the US car company is believed to prefer commercial supply agreements.

If the deal goes ahead it will be another big industrial acquisition for the ambitious Indian group. Last year it bought the Anglo-Dutch steel maker Corus.

Japanese automobile company Mitsubishi Motors may launch a compact car in the B segment in the country. The car is expected to hit the roads in three years.

Though Mitsubishi sells Pajero SUV and Lancer sedan in India, they have not generated adequate volumes for the Japanese automobile company. The compact car will take on Maruti Swift, Hyundai Getz, Skoda Fabia, Fiat Palio, Chevrolet U-VA and Ford Fusion.

The company's Chennai plant will be expanded to produce the compact car and other products.

Mitsubishi Motors, which has a technical tie-up with the CK Birla-promoted Hindustan Motors, sells Pajero SUV and Lancer sedan in India.

Mitsubishi executives, however, said the company was not late in entering the small car market in India, which has seen an average jump of more than 60 per cent with monthly sales reaching about 10,000 units. Mitsubishi's compact car will take on Maruti Swift, Hyundai Getz, Skoda Fabia, Fiat Palio, Chevrolet U-VA and Ford Fusion.

A 4% reduction in excise duty on small cars has augured well for the Nano, the Rs 1 lakh car of Tata Motors. Nano, expected to roll out from the Singur factory around September-October, will now have enough cushion to withstand a sudden spurt in input prices when it hits the Indian roads.

Nano has been priced at Rs 1 lakh after taking into consideration an excise duty of 16%. A 4% reduction will offer Tata Motors more headroom to hold on to the Rs 1 lakh price point in case of rise of inputs, like steel, aluminium and plastic parts.

However, Tata Motors company spokesperson said that it was too premature to comment whether Tata Motors will pass on the benefit of reduction in excise duty to buyers as it has done for other small cars in its stable. "This car is made to cost. The cost has been decided first and the design and engineering followed to fit to the price. Reduction in excise duty will enable the company to absorb price hikes of input materials and components through the margin that is now created as result of the reduction. Input costs for automobiles have in fact risen considerably in the past one year. For example, price of steel has risen by at least 15% over the last one year," said an auto expert.

As Tata Motors gears up to launch the world's cheapest car Nano later this year, financing companies, including ICICI Bank, SBI Bank, HDFC Bank and Saraswat Bank, are busy charting out attractive finance schemes to woo the buyers. The Mumbai-based Saraswat Bank is offering a loan of Rs 70,000 at a monthly installment of a mere Rs 1,199 spread comfortably across 84 months or 7 years. The rate of interest is 11-11.5 per cent, which is cheaper than a two wheeler loan.

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

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

The comparable financing structure for a premium two-wheeler forces you to pay more every month through it is for a shorter period of time. For instance, a Bajaj Pulsar 220 is sold at Rs 92,675 with an equated monthly installment (EMI) of Rs 2200 for a period of three years.

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

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

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

It goes without saying that the directive from Reserve Bank of India (RBI) will be crucial. "Although many banks would come out with attractive financing offers, a lot will depend on market situation and risks involved...but we are talking of huge volumes and many smaller banks will look to grab the opportunity to build a brand through attractive schemes", said a banking executive.

With the looming US economic slowdown forcing an interest rate cut of 0.75 per cent on Tuesday, there is growing speculation that the Reserve Bank of India (RBI) will do the same shortly.

If that happens, one could see a slash in retail loan rates, including home loans, by 0.25-0.5 per cent, over the next two quarters. Floating rate home loans are between 10.25 per cent and 10.5 per cent for HDFC, SBI and ICICI Bank, the three major lenders.

The RBI is scheduled to announce its quarterly monetary policy next Tuesday. It will be under pressure as the Federal Reserve (the Fed) rate cut has widened the differential between US and Indian rates to 4.25 per cent. (The Indian repo rate, the rate at which the RBI lends to banks, is 7.75 per cent, while the US Fed's overnight rate is 3.5 per cent).

With this kind of differential, it makes sense for foreign players to borrow in the US and lend in India to make money on the spread. The RBI would not want that, for the arrival of a deluge of dollars will make the rupee stronger, reducing our ability to export.

With a population of 1.1 billion, an expanding economy, and a rapidly growing middle class, India seems to be the perfect market to introduce an inexpensive automobile.

With much media coverage, Indian automaker Tata Motors Ltd. rolled out the Tata Nano at the New Delhi Auto Expo 2008. The Nano will become the world's cheapest and smallest car with a sticker price of around $2,500, which is more than $1,000 less than the next cheapest car, the Maruti 800. Tata said that the model will be sold only in India for the first few years, and shipments to emerging markets such as China, South America, and Africa may follow soon after.

Tata's competitors quickly jumped into the fray. Baja Auto Ltd.-considered to be the second largest motorcycle producer in India-announced that it will build its own small car in partnership with Renault S.A. and Nissan Motor Co. in about three to four years. Ford Motor Co., with an investment of $500 million, also promised a small car in India within two years.

Tata Motors is a member of the Tata Group, the largest conglomerate in India. The group consists of 98 companies that operate in seven business sectors, including information systems and communication, professional services, consumer products, metal products, chemicals, and energy. Tata Steel Co. Ltd. and Tata Motors are the largest companies within the group.

The people's car from Tata, called Nano has created a new opportunity, which the banks definitely don't want to miss. However, the customer profile that is expected to go for Nano is mostly middle class and lower middle class, and banks are worried that these segments have a higher risk profile as compared to other car loan borrowers.

Tata Nano is expected to create a huge dent in the two-wheeler segment and many two-wheeler owners have already expressed interest in owning a Nano. They are even willing to defer their decision to buy another or a new vehicle till the car is available in the market. The two-wheeler loan segment has one of the highest default rates among various retail loans and hence carry a higher rate of interest.

At present the car loans in India are available from lenders at interest rates ranging betwen 12-16 percent, while the two-wheeler loan segment have higher interest rates ranging between 18 -22 percent. In addition to the high interest rates, two-wheeler loans have low tenures generally around two years, while car loans are available for around 7 years.

This loan tenure and interest rate scenario of two-wheeler loan segment can come into picture since the entry level model of Nano is expected to cost around 1.25 lakhs. Keeping in mind the income profiles of this segment of borrowers, banks are contemplating on adding a 'running cost' component to the loan for Tata Nano. This could effectively increase the loan amount and hence enable banks to offer loans of longer tenure with lower EMI's, which could be easily afforded by borrowers of this segment.

The resale value of Tata Nano and design defects, which have been a regular feature of Tata's popular cars like Indica, are also making the banks take a cautious stand on financing Nano. P. Sridhar, Senior VP,IndusInd Bank said, "If there are design defects it will affect the resale value of the car which could drop to just Rs 50,000-60,000."

Nothing has generated as much hyperbole in the global automobile industry in recent years as the unveiling, last week, of an ultra-cheap bare-bones car made by the Tatas, India's steel and engineering giant.

Ppriced at 2,500 US dollars, the 'Nano' is arguably the world's cheapest four-wheeled passenger vehicle.

However, the 'dream car' may turn out to be an ecological nightmare and a not-so-safe driving machine, without airbags to protect riders or anti-lock braking systems. It could prove a menace to India's already congested roads, and a source of enormous pollution and of health damage, besides becoming a drain on public resources.

Above all, it will set back the all-important fight against global warming, in which the Indian government is at best a reluctant partner who refuses to accept any time-bound commitment to reduce his greenhouse emissions, now growing three times faster than the world average.

According to management experts, the car has created a new paradigm of "frugal engineering" and will trigger breathtaking innovations in manufacturing technology in the global automobile industry based on severe cost-cutting.

Yet, despite stripping the Nano down to its most rudimentary dimensions to produce what a United States media presenter termed as "a golf cart crossed with a jelly bean", Tata Motors is unlikely to be able to fulfil its 2,500 price promise for long.

Ford India Ltd, a wholly-owned subsidiary of Ford Motor Corporation on Tuesday announced that it was expanding its manufacturing capabilities to make a "new small car" for India besides setting up a new engine facility with an investment $500 million.

Addressing a press conference, Arvind Mathew, managing director and president, Ford India said that the new investments would be in the form of fresh equity by the US parent besides some domestic borrowings. "A new plant capable of making engines (both petrol and diesel), with a capacity to make 2.50 lakh engines a year is part of the investment. The engines will be both for Indian vehicles besides exports to other markets. This is the first time that Ford is making diesel engines outside Europe," Mathew added.

The manufacturing capacity at the Chennai car plant would be doubled to two lakh units a year.
A large portion of the fresh capacity would go towards making a "new small car". "We will launch a new small car, as a worthy competitor in the segment in two years time, which will coincide with our expanded capacities coming on stream," he said.

Links-via-The Times of India

The maker of some of the world's cheapest cars is now aiming to take over two of its most storied and snobby auto brands.

Indian automaker Tata Motors Ltd., which has vowed to unveil the world's lowest-priced car at an auto show in India next week, is now in "focused negotiations" to buy Ford Motor Co.'s upscale Jaguar and Land Rover brands, the companies confirmed yesterday.

It's the first time Ford has revealed the identity of a potential buyer for the units, which it put up for sale in June. Ford did not say if any other bidders were still in the running.

Beyond the irony of an Indian company taking over what were once Britain's crown-jewel auto manufacturers, an obvious question lingers if Tata is successful with its offer: Will an Indian Jaguar and Land Rover sell?

After all, Tata makes cars that cost $6,500 and is readying to show off a $2,500 car at the New Delhi Auto Expo on Jan.10. For the Brit brands' well-heeled customers, will new Indian ownership devalue the appeal of vehicles driven by the Queen of England and other affluent car buyers?

Some Jaguar dealers in the United States have raised that concern.

The tea-to-steel giant also looks set to drive off with two exclusive automobiles: Ford's Jaguar and Land Rover brands.

Company chairman Ratan Tata will unveil the budget car on January 10 in New Delhi. Some analysts predict it will revolutionise car costs worldwide.

Mr Tata, who trained as an architect at Cornell University in the US, helped design the car, which is aimed at getting India's masses off their motorbikes and into cars.

"I hope to make a contribution to making life safer for them," Mr Tata, 70, said in amessage on the company's website.

"That's what drove me - a man on a two-wheeler with a child standing in front, his wife sitting behind, add to that the wet roads - a family in potential danger."

But despite its low price, some analysts say the four-door, five-seater could be a tough sell for Tata's vehicle arm, Tata Motors, even with an economy growing by 9 per cent a year, creating new affluence.

source: The australian

On offer would be everything from haute hatchbacks and green tech hybrids to adrenalin-dripping super premium luxe models. Not to mention the world's cheapest automobile, the Rs 1 lakh people's car from Tata Motors.

As usual, the biggest action will be in the small car market where global best-sellers will rub shoulders with locally-developed tarmac scorchers. Maruti Suzuki will kick off the action with its Splash and A-Star concept, though the latter would be a predominantly export model. In the premium hatchback category, the Swift, Getz, U-VA troika will face competition from the likes of the Skoda Fabia and the Fiat Grande Punto, though all eyes would definitely be on the Rs 1-lakh car. Before making a decision to buy your own car just go for compare car loan rates to make a check for the cheap and low interest loan.

The mid-size market would sizzle too with debutantes like the i20 from Hyundai, Logan-spawned Sandero from Renault, the Jetta from Volkswagen and the Linea from Fiat. Add to that the Swift sedan and the new launches cover every price point in that segment.

The Fiat Bravo and the Mistubishi Lancer Gallant will keep the debut buzz alive and kicking in the mid-size premium segment. But some of the sexiest newcomers next year will be 4x4 muscle-flexers. While Mitsubishi is all set to bring along its Outlander sports utility vehicle (SUV), GM will roll out its Captiva, Hyundai the Santa Fe and BMW the X6. So if you like your vehicle BIG and MACHO, you'll have plenty to choose from next year.

The Japanese company plans to export nearly two-thirds of the 150,000 cars due to be made here annually.

Suzuki says it will invest $1.8 billion to increase capacity in its Indian factories over the next 15 months.

Suzuki is not the only company to use India as a manufacturing base for compact cars being sold on global markets.

South Korea's Hyundai has also made India a production hub for small cars. In October, the company launched a compact car known as the i10, which is being made only in Hyundai's Indian plants in the south of the country.

Much of the production is being exported, to Europe, Russia and Latin America.

Nissan says it also plans to manufacture a small car in India for export to Europe. That's why it is always advised to compare car loan rates to avail the cheapest loan.

Industry analysts say India offers several advantages to car manufacturers. Yogendra Pratap , formerly editor of the automotive magazine Overdrive, says the country offers expertise, low production costs and millions of potential customers.

"India has all the engineering skills that are required to make cars," said Yogendra Pratap. "It is definitely cheaper to make cars here than elsewhere. For the sub-compact segment, India also has the volumes now. It makes sense to have a production base and a development base in a country where you are going to be having major volumes. Suzuki for instance sells more cars in India than in Japan."

Global auto manufacturers are focusing on compact cars as demand for them rises worldwide. Stricter emission rules in Western countries and rising fuel prices are prompting many European customers to opt for small cars.

Over the next five years, economists predict that hundreds of millions of people in emerging markets such as India, China, Russia and Brazil will be joining the middle class, and looking for cars priced under $10,000.

Cars will get just heavier on the buyers' pockets as leading manufacturers including Maruti Suzuki, Hyundai and General Motors are planning to raise prices of each of their models starting from the last week of this month or early next month.

Maruti Suzuki, India's largest car maker, will raise the prices of all its models in January by Rs 12,000. General Motors, owners of the Chevrolet brand, will raise prices one to 2 per cent across models in the same month.

Maruti sells about 11 models in the country, which is also the largest offering by any manufacturer in India.

Company officials from the Korean car maker Hyundai Motors also said that a price rise of about 2 per cent can be expected for all its models by the end of this month or by early days of next year.

You don't have to wait for another lifetime to see a hybrid in India. Honda Siel Car India, the Indian arm of Honda Motor Company, is trying to make India a greener place to live in. The company's Civic hybrid will take a bow in India in 2008 summer, making it the first green car to be launched in India.

While attempts to move over to alternative and renewable fuel have been made in India with liquefied petroleum gas, compressed natural gas and bio-diesel powered cars, the Civic hybrid will be the first mass produced hybrid car to hit Indian roads.

Planning to ride a car on Indian roads so make sure to compare car loan rates before going for loan. you can secure your future and also save your pocket earnings.

Honda had launched the hybrid version of the Civic in 2003. The one that will come to India is the 2008 Civic Hybrid, which is currently sold all over the world. The car works like any other, except that you don't have to plant a forest every time you take it out for a spin.

Auto-maker studying feasibility of importing Mazda2 kits.

US automobile manufacturer Ford is studying the feasibility of launching a compact car in India that will be imported as a completely-knocked-down (CKD) kit from a manufacturing hub in Thailand.

The plan leverages India's free trade agreement (FTA) signed with that country in October 2003.

Ford is building a car plant in Thailand in alliance with Japanese automobile company Mazda. Ford owns 33 per cent in Mazda.

The joint venture, called AutoAlliance Thailand, will make compact cars starting 2009 for the domestic and Association of Southeast Asian Nations (Asean) markets. The Mazda2 is already available in the US and the UK.

The $2,500 Bajaj-Renault-Nissan car project could adopt an equity structure model where Bajaj will hold a 50 per cent stake in a new entity with the balance shared equally between the other two allies.

This will be on lines of the Mahindra-Renault-Nissan venture in Chennai, which will see over 400,000 cars being produced at an investment over Rs 4,000 crore and tipped to go further up in the coming years.

According to top industry sources, the Bajaj small car plan could also see a new company being set up for powertrains.

The equity structure here could either be on lines of the car venture or controlled by the Renault-Nissan combine.

Festive season purchases during October led auto sales to a recovery path but was not enough to take it to positive territory with the Indian automart registering a 0.65 per cent decline in overall vehicle sales.

According to figures released by the Society of Indian Automobile Manufacturers (SIAM), total vehicle sales in the country in October stood at 10,10,963 units against 10,17,611 units in the same month last year.

Hit hard by rising interest rates sales growth, specially that of motorcycles remained negative, while that of cars managed to increase on the back of majors like Maruti Suzuki India (MSI) and General Motors India (GMI) posting healthy numbers.

The General Motors (GM) India Limited, the Indian arm of the largest United States automobile maker, is planning to set up a car engine or power train facility in India, a company executive says.

"We are going to set up a power train facility in India and are evaluating locations," Karl Slym, Head of the GM India, was quoted by the Hindustan Times, a local newspaper, as saying.

Slym, however, did not elaborate on the investment that GM plans to make in the plant. The GM has one plant in Halol, Gujarat in India, where its Tavera, Optra, Aveo and Spark cars are assembled.

Honda may soon be bringing the hybrid version of its popular Civic to India. Close on the heels of Toyota announcing its intention of bringing its Hybrid Prius into the Indian market, a senior Honda executive said his company would launch the version in a few months.

Honda is also planning to manufacture its compact hatchback, the Jaz, which has been a great success in markets abroad, and another car at its plant in Rajasthan. The plant is under construction and expected to be complete by 2009.

"I would like to bring in the Civic hybrid to India as early as next year," said the executive who refused to be named, citing company disclosure norms at the sidelines of the Tokyo Motor Show, where the company showcased two concept cars, the fully hybrid CR-Z sports concept and the Puyo, a jellybean car with a soft body that absorbs shocks.

After it withdrew its imported sports utility vehicle (SUV) Terracan, Hyundai Motors India (HMIL) is planning to phase out its premium sedan Elantra from Indian road due to dwindling sales. HMIL's Elantra, which never made it to the top in terms of sales since its launch around five year ago, has sold only three cars in September, two in August and nine in July. While its cumulative sales tally for the six months of this fiscal stands at 173 units, the company sold only 14 units in the last three months. These cars were all produced in the last fiscal year as Hyundai has not manufactured a single Elantra this year.

An e-mail query to HMIL went unanswered. According to the Society of Indian Automobile Manufacturers (SIAM), HMIL has totally stopped the production of Elantra from April and had produced 1,683 units of Elantra in the last fiscal year. Elantra had always been struggling to find its place amidst General Motor's Optra, Toyota Corolla, Honda Civic and Skoda Auto's Octavia which have been posting impressive sales in India.

It won't just be Jazz music for Honda in India. Even as it readies to formally premiere the GeNext Jazz at the Tokyo Motor Show, the Japanese auto major is working on a brand new platform for a small car that will use India as the manufacturing hub.

The new platform will be for a global car like all Honda platforms but will be primarily sourced and manufactured out of India. This will be a first for Honda which has a handful of basic platforms worldwide from which it spins out new models.

When contacted, a Honda Siel spokesperson said, "Honda is looking at two cars in the compact segment in the next few years but we don't have details right now."

Mahindra & Mahindra's (M&M) entry level sedan Logan, which hit the Indian roads some six months back, may not have set its sales register soaring exactly, but it has been named among the 16 best cars not sold in America by a leading US magazine.

In the list of 'The Best Cars Not Sold in America', compiled by BusinessWeek in its latest edition, Logan is the only Indian car along side 15 others being sold in the non-American markets.

"The car (Logan) itself is not that interesting by the standards of US consumers -- for starters, it has got right-hand drive and the base engine is only 75 hp -- but its heritage shows how the world is shrinking," BusinessWeek said about the car.

Hero Honda Motors Ltd, which makes half the motorcycles sold in India, introduced a new 150cc bike called Hunk, in a bid to increase market share in that segment, a day before declaring its quarterly financial numbers.

Hero Honda said it expects a revival in motorcycle sales, which have dropped after banks increased auto loan rates in the festival season, which started last week. "From our own premium (bike) portfolio, we expect the highest (sales) numbers" from this model, said Pawan Munjal, managing director of the company.

Hero Honda has a 15-20% market share in this segment, which is dominated by rival Bajaj Auto Ltd's Pulsar model. About one in every seven motorcycles sold in India's 6.5 million a year motorcycle market is a premium motorcycle, or one powered with engines of 150cc or more.

Tata Motors

2008 is likely to be a great year for the company. They are scheduled to launch the much awaited Rs. 1 lakh car. The car is likely to revolutionize the auto market in India with the innovative use of technology and ideology.

Skoda

They are currently scheduled to launch the much awaited Fabia model in the market. The launch could take place within the next two months. But if it gets delayed this time around, 2008 would see this brand new model in the Indian market.

Expecting a bullish demand in the festive season, car market leader Maruti Suzuki India Ltd (MSIL) has decreased discounts on its best-selling hatch Alto and flagship Maruti 800 by Rs 1,000 and Rs 4,000 respectively.

The company was offering a discount of Rs 11,000 on Alto, which will now come down to Rs 10,000, while discount on Maruti 800 would drop to Rs 8,000 from Rs 12,000 earlier.

The reduction in discount is in line with the company's expectation of a good demand of Alto, Omni and Maruti 800, sources said.

MSIL would continue offering discounts on various models except Swift and SX4.

It currently offers Rs 18,000 discount on Wagon-R petrol and Zen Estilo, while Rs 3,000 is off on Wagon-R LPG. A heavy discount of Rs 30,000 is being offered on Esteem, which is expected to be phased out by next year.

The company is offering a discount of Rs 10,000 on its multi-utility vehicle Versa. The discount on Omni, however, has been reduced to Rs 6,000 from previous month's Rs 7,000.

Avtec, one of the largest players in powertrain (engine and transmission) manufacturing and part of the CK Birla group, is setting up a greenfield facility to supply critical powertrain parts to the Tata Motors Rs 1-lakh car. The company will be investing Rs 100 crore in the first phase at Kharagpur in West Bengal.

Avtec CEO Sudhir Rao said: "We will be producing powertrain sets for 1.5 lakh units of passenger cars and 35,000 commercial vehicles, from the first quarter of 2008. The proposed investment of Rs 100 crore, which will be partly funded through internal accruals and debt in the first stage, will be for powertrain assemblies.

In the second phase with the gradual increase in the volumes of our original equipment manufacturer (Tata Motors) we will cater to other automotive components." He, however, refused to comment whether the transmission spares are for manual or automatic systems in the proposed Rs-1 lakh car.

Price isn't the only 'first-ever' aspect of the Tata Motors' Rs 1-lakh car. According to sources in the auto industry, the car will sport the world's first 800 cc, turbo-charged, CRDi diesel engine. The company is working on two engine options for the Rs 1-lakh car. The petrol version with a 600 cc engine will debut first in 2008. The diesel version will follow later, probably in 2009.

While Bosch is working on the CRDi system for the Rs 1-lakh car, Honeywell Turbo India is understood to be working on the turbo-charger. When contacted, a Tata Motors spokesperson said: "The company does not have any information to share on the small car, beyond the fact, as already stated, that it will be a four-door, four to five-seater rear engine car."

Hyundai Motor India's 'free car care clinic' was today inaugurated at Alcon Hyundai's state-of-art 3S set up at Porvorim by Lt Col (retd) Ravi C Reddy in the presence of Mr Aakash N Khaunte - CEO, Mr Ameya Rao - general manager. The camp will conclude on October 17 and is being held at over 320 Hyundai dealer workshops across the country.

Hyundai Motor India, the country's second largest automobile manufacturer and leading passenger car exporter launched its third nation-wide free car care clinic, in an effort to extend the advantage of its excellent services and free check-up to a larger number of its customers. The free car care clinic was successfully introduced in 2006 and subsequently conducted in January and February of 2007.

The clinic will offer a comprehensive 80 point check-up and a thorough examination of the engine, transmission, electricals, under-body, AC, body etc. Alcon Hyundai customers can avail this Free Check-up at its workshop.

Budget cars proposed by automakers like Tatas may adversely impact two-wheeler sales in metros and semi-urban areas as consumers await the breakthrough, says a study by Assocham.

The study called "Two-Wheeler Vs Small Car revealed that consumers in semi-urban areas were more inclined to buy a small-budgeted car priced at around Rs. 1 lakh "to satisfy their quest of prestige". While, in metros cars are purchased because they are 'needed' and offer safety.

Assocham says that about 90% of the respondents of the semi-urban segment "categorically stated" that they would manage their movements with existing possession than invest in buying a two-wheeler. The participants from the metros echoed similar responses.

Auto companies like Honda, General Motors., Tata Motors and Bajaj Auto Ltd. have slashed their advertising spend on traditional media of advertising like print and TV in the first half of 2007.

According to research by Adex India, a division of TAM Media Research auto advertising in print media fell 11 per cent to Rs. 475 crore in the first half of 2007 and on television by 0.54 per cent to Rs. 848 crore, when compared to 2006.

On the other hand, ad spend on other media like Web, Radio, direct mailers and point-of-purchase promotions - which are cheaper by comparison - have seen an increase. Media experts say the diversion of funds to other media could be due to a fall in sales and rise in lending rates. The lending rates are at a 5-year high so companies may have been prompted to spend more on dealer discounts and promotional schemes.

A Merc targeted at the Rs 10-lakh car buyer? That's what DaimlerChrysler India is hoping to achieve through its finance tie-up with the ICICI Bank, ensuring that the aspirational brand is not unattainable.

The venture, Star Choice, will offer customised finance schemes, one of which has an ultra-low equated monthly instalment (EMI) of Rs 29,999 or a down payment of as low as 5-10% - for a C Class entry level Mercedes priced in the range of Rs 26-30 lakh, ex-showroom Pune. An EMI in this range is what a buyer of a Rs 10-lakh car pays.

Dr Wilfried Aulbur, managing director and CEO, DaimlerChrylser India (DCIL), said they will extend the finance scheme to the used car programme, too. "A Mercedes Benz is an aspirational car, not unattainable, so this brings it within the reach of more people," he added. The Mercedes E Class comes in a price range, ex-showroom Pune, of Rs 35-48 lakh, while the S Class starts at close to Rs 70 lakh and a truly fully-loaded one crosses the Rs 1-crore barrier.

India's largest car manufacturer Maruti has now launched the "Smile India Smile" offer which runs till August 15.

Under this scheme, Maruti is offering discounts ranging from 7,000-30,000 rupees on several of their models including Alto and Esteem.

The aim is to boost the sales of their cars. Market is seeing a slowdown of sales as the auto loan interests are touching new heights.

The company further said that it would be hard to match its record domestic sales of 2006/07 because of firm interest rates.

They are not alone suffering from rising interest rates. Tata Motors has announced that they are scaling down production of their cars as a result of softer demand.

Planning to apply for car loans? Are you aware of the loan offers available in the market? Do you have too many options at hand and can't decide which one would be the best? With interest rates going up sharply, do you think it is the right moment to opt for a car loan?

Thousands of auto loan customers in the region are feeling defrauded by banks, which have not passed on the benefits of fall in interest rates.

Customers say though the current market rate of interest have come down to below 10 per cent for auto loans, but ICICI, CitiBank, HDFC and HSBC are still charging 14 or 15 per cent rate of interest from those who has taken loans three or four years ago.

The bankers say since the RBI or the government has not issued any instruction, so they are not bound to pass on the interest rate benefits to the customers, who had taken loans earlier. Further, unlike housing loan market, the auto loans are mostly given on fixed interest rate basis.

Mr R.K. Bajaj, Chief Manager, SBI, admitted that a number of customers, especially from private banks, were approaching them to take over their loans due to higher interest rate and exorbitant charges in case of default. He said," The SBI has reduced interest loans on cars up to 9.25 per cent for 3 years without any hidden costs. Further, in case of unknowingly default in repayment the bank will charge just Rs 50 unlike up to Rs 500 charged by some of the banks."

If your poor credit history has been shattering your plans to purchase your dream vehicle till date, it cannot be so any longer. Thanks to the numerous schemes being offered by financial organizations nowadays, almost every person on the street can fancy their wishes being fulfilled. Such financial schemes as bad credit car loans allow people with even bad credit score to make their luxurious purchase.

To begin with, bad credit car loans are offered to people having a poor credit status. There are a number of reasons tarnishing a person's credit record; County Court judgments, bankruptcy, arrears, missed installments to name a few. Prior to applying for a bad credit car loan, it is advisable to do some homework and analyze one's financial status to let the borrower estimate the car loan interest to be paid. In case he finds the loan scheme unsuitable to his requirements, he has always the option to shop for other lenders. In fact, it is always wise to shop for car loans before settling for one.

Bajaj Auto Ltd gives fierce competition in the world's biggest market in India after China. It is the second biggest motorcycle makers in India. Bajaj are also makers of scooters and dominates the three-wheeled motorized rickshaw market. In the fiscal year, first quarter to June 30, their net profit fell to 2.26 billion rupees from 2.76 billion rupees reported a year earlier.

On Thursday Bajaj Auto Ltd issued a statement that its quarterly net profit fell 18 percent on high commodity prices.

American major car company Ford today confirmed that it has received bids from some companies for acquiring its marques Jaguar and Land Rover - the two famous brands in which India's Tata group has been reported to be interested.

Ford spokesperson John Gardiner released an e-mailed statement in which he stated that, "Ford and its financial advisers have had contacts from third parties and they are actively evaluating those as part of Ford's strategic review. These are preliminary discussions only and no decisions have been made."

The Central Crime Station (CCS) has unearthed a multicrore car finance scam, and nabbed three persons in connection with the crime.

Deputy commissioner of police (crimes) Amit Garg said Trimulgherry-based Acer Motors, a Maruti dealer, also figures as an accused in the case. "The case is still an open-ended one, and we're yet to arrive at what level the management of the Acer Motors is involved," the DCP told The Times of India on Saturday.

If you are planning to buy a car this new year and have already worked on the financial details on how much you will have to fork out a month towards EMI, go back to scribbling pad and rework the entire package.

The bad news is that car finance rates are going up by 50 basis points (BPs) from January 1 and couple this with the routine exercise by car makers on hiking prices in January.

A 50 BPs increase in five-year loan with daily rest would translate into an increase of Rs 26 for every lakh borrowed.

"Made in India" could be the next big economic story with the country challenging China's position as the leading global manufacturing hub within five years, says a new report.

Right now China is the favourite choice for outsourcing manufacturing while India is preferred for information technology, finance and customer services, said Capgemini, Europe's largest computer consultancy.

But "there's a very keen interest in moving more manufacturing to India," said Roy Lenders, vice president at Capgemini Consulting Services and the report's author.

In fact, "India could challenge the position of China as the manufacturing centre of the world in the next three to five years," Lenders said, citing a survey of 340 mainly Fortune 500 global manufacturing companies.

"What surprised us was when we asked about their plans for the next three or four years, they said outsourcing manufacturing (to India) was a higher priority than outsourcing back office work," he told AFP in a telephone interview from Utrecht in the Netherlands.