What does the future of automotive financing look like in a world that craves more personalisation, convenience, speed, and tech-driven digital solutions? For NBFCs, the answer is apparent – moving beyond the traditional, one-size-fits-all lending architecture to deploying solutions that cut through deeper layers of the industry and end-user needs.
As the automotive industry transforms, so do the financing requirements of its stakeholders. This shift calls for adopting strategic sourcing partnerships, digital offerings, and comprehensive end-toend product solutions to meet the diverse needs of both passenger and commercial vehicle users.
At the intersection of rising consumer automotive aspirations, booming infrastructure development, and a thriving logistics sector, NBFCs are stepping in as enablers to bridge gaps and deliver solutions across the vehicle financing spectrum.
NBFCs Bridging Bharat and India
India’s automotive sector, once majorly saturated in tier 1 cities, is now experiencing a trend shift. Aspirations of vehicle ownership are rapidly spreading to tier II and III cities. With rising credit awareness, NBFCs have effectively been instrumental in driving this shift through financing solutions that are more timely, accessible, flexible, and aligned with the unique financial profiles of customers, many of whom are firsttime borrowers in these emerging markets. By tapping into the latent demand stemming from an underbanked customer base, NBFCs are playing a pivotal role in accelerating India’s automotive growth story— one that is more inclusive and far-reaching than ever before.
Offering End-To-End Holistic Automotive Financing
Holistic automotive financing goes beyond merely providing loans; it entails understanding the broader context of customer needs. Particularly for Commercial Vehicles, Tata Motors Finance offers a one-stop suite of value-added services such as insurance, financing for vehicle upkeep, fuel, automotive spare parts, working capital, and financial advisory, ensuring customers not only acquire their vehicles seamlessly but maintain them well throughout its lifecycle. By adopting a comprehensive lending architecture, NBFCs are not only enhancing customer experiences but also playing the role of an enabler turning aspiration into ownership, further optimising the entire value proposition.
Formalising Informal Automotive Markets
With a wider reach and access to the diverse underbanked customer base, NBFCs are well-positioned to capitalise on the emerging preowned commercial vehicle market. Earlier fragmented, the preowned segment is now gaining traction as rising vehicle prices drive logistics fleet operators and passenger vehicle buyers toward preowned alternatives. Moreover, the financing market penetration in this segment is improving simultaneously. NBFCs too have responded to this shift by organising and structuring the financing ecosystem around pre-owned vehicles. For NBFCs, pre-owned vehicle segment financing is set to drive up profitability in times ahead. While the pre-owned vehicle asset quality is anticipated to improve with control measures and better vehicle built, the overall pre-owned vehicle book is expected to expand to 40% by March 2025 from about 35% in March 2020, observes an ICRA report.
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Technology Building Faster and Newer Financing Avenues
The advancement of NBFCs is closely tied to the rapid adoption of technology, transforming its operations in unprecedented ways. Digital platforms are revolutionising how NBFCs function, enabling faster approvals, more transparent processes, and deeper customer engagement. Additionally, technology has paved the way for innovative product solutions that were virtually unimaginable decades ago. Through fintech partnerships and by integrating digital tools, NBFCs today have the capabilities to enhance risk assessment, expedite loan disbursals, and streamline documentation and loan decisions, thereby significantly improving the overall customer experience.
Potential to Accelerate Government-Led Policies
The recently launched PM E-Drive policy for transforming India’s EV automotive landscape outlines targeted incentives and subsidies to simplify EV buying journeys, including two-wheelers to e-trucks. As e-mobility infrastructure scales up and gains market share, the financing ecosystem around it is set to become robust. Effectively, NBFCs are well positioned to contribute to EV adoption by lowering entry barriers and affordability gaps with financing solutions complementing the Govt. incentives and subsidies.
From vehicle acquisition to maintenance and beyond, NBFCs are embedding deeper into the automotive ecosystem, offering comprehensive, end-to-end solutions. As forecasted by a CRISIL report, the vehicle financing AUM for NBFCs is likely to surge to Rs 8.1 lakh crore by March 31, 2025, from Rs 5.9 lakh crore as of March 31, 2023, consolidating 17% CAGR.
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In sum, the ability of NBFCs to provide tailored solutions, coupled with agility to operate in emerging markets, form sourcing partnerships, and harness technology faster, sets them ahead of the curve. With innate capabilities to serve a broader customer base with precision, transcending beyond the ‘One-Size-Fits-All’ lending architecture, NBFCs are quilling the future of automotive financing—one that is more holistic, inclusive, and responsive to the evolving needs of customers.
Views expressed by Neeraj Dhawan, Managing Director (Designate), Tata Motors Finance
