Audi plans Indian auto loan firm

Audi AG, the luxury unit of Volkswagen AG, plans to form an auto finance arm in India after offering car loans helped rival Bayerische Motoren Werke AG become the country’s biggest luxury car seller last year.

Audi planned an announcement on vehicle financing as early as this month, Michael Perschke, head of the Ingolstadt, Germany-based carmaker’s India unit, had said on February 3. Lending to potential buyers might help the company boost sales 50 % from last year to 4,500 vehicles in 2011, he said.

Perschke is also following Daimler AG, which said last week it would begin offering car loan to customers in the second half of this year as rising interest rates boosted the attractiveness of dealer credit for car buyers. BMW opened its finance arm in October and overtook Daimler in India luxury car sales last year.

“Starting up finance arms is a good idea for luxury car makers to increase their volumes without hitting their luxury image,” said Deepesh Rathore, managing director at researcher IHS Automotive in New Delhi. “They would be able to offer customers finance at better rates than a bank and bring down the entry threshold for customers.”

Luxury car sales in India will jump to 60,000 by 2017 from 15,000 in 2010, driven by rising incomes and economic growth, IHS Automotive estimates. Audi, Daimler and BMW sold 12,114 cars between April and December 2010, an increase of 86 % from previous year, according to Society of Indian Automobile Manufacturers monthly data.

The government today predicted the economy will expand the most in three years in 2011, supporting the central bank’s case for raising interest rates to combat inflation. RBI increased interest rates in January after pushing borrowing costs upwards six times in 2010. Rising rates were increasing the need for financing, Peter Honegg, India head of Daimler’s Mercedes Benz unit, said last week. “It will help a lot” to offer credit, he said.

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