Automobile industry expects more financial packages to push sales

6 November 2015 02:21 am

 

• Market expected to return to normalcy in coming months
• Wait-and-see attitude observed amongst buyers
• Sales expected to be largely on vehicles falling within lower price brackets
• Savvy local consumers appear to have capitalised on cheaper funding lines

By Shabiya Ali Ahlam
The local automobile space is currently operating in an uncertain environment, but the industry is optimistic the financial landscape will conceptualize more solutions that would help push sales, online vehicle retailer Carmudi said.
In a white paper released yesterday, Carmudi Sri Lanka said although dealers have been hit by the recent developments in the market, traders expect more packages from financing companies.
“We can expect that in the near future financial institution will look to provide products that cater to the small vehicle segments that make repayments more affordable while also strengthening the existing products in the second hand market, where the demand has shifted,” said Carmudi Sri Lanka Head of Accounting Management Zared Raymond.
Innovative products from finance companies and the government reversing its decision to impose a 70:30 debt to equity ratio is observed to have made the purchasing process easier on the buyer.
Reflecting the sentiments of the market, the research highlighted that recent events that resulted in vehicle values expanding have significantly affected the market. 
The online retailer pointed out that potential changes to vehicle taxation policies, and a reversal on downward interest rate momentum could tip the balance of vehicle financing in favour of an alternate model where consumers may be forced to take on a larger proportion of the total cost of the vehicle, potentially signalling a shift in conditions for finance companies and banks.
“We see lower sales in vehicles since news broke of this increase. However, interest rate changes are not expected to affect the market drastically due to it being a very nominal increase thus far,” noted Carmudi Sri Lanka Managing Director Firaz Markar while snaring a snapshot of the research.
Furthermore, while the dealers adopt a wait and see approach towards vehicle buyer intent, the market is expected to return to normalcy over the following months or so with sales expected to be largely on vehicles falling within lower price brackets, he added.
As the recent government measures to reduce vehicle imports have resulted in the overall import values of vehicles, making vehicles less affordable and creating a wait-and-see attitude amongst buyers, Carmudi cautioned that both, the value of the vehicle and vehicle loan and lease interest rates ‘must’ be favourable if the industry is to witness drastic growth.
Among the key findings of the Carmudi whitepaper was the dramatic increase in registrations of new vehicles in 2015 which hit an all-time high of 4,990 vehicles in August 2015, as compared with the previous year.
The paper revealed that small cars, hybrids and full-electric vehicles were found to have displayed a rapid increase in popularity among local consumers over the course of 2015, in part boosted by the volatility in state regulatory and import policy which may be having a notable impact on demand as consumers look to secure the best possible deal on their purchases. 
In that process, the majority of savvy local consumers appear to have capitalised on cheaper funding lines in order to make their purchases as evidenced by a larger reliance on the car financing options.