With the increased incomes of many Indians leading to increased sales of the local automobiles , the global automakers have come forward to make luxury cars available to the Indian market at cost which can be affordable, considering in past, how these products were imported and had huge taxes over them.
This move, is basically, targeting the upper middle class, who are earning much more than earlier as they are the section that anticipates for a higher status and are considered to be the ambitious section of the society. Finance rates for luxury vehicles are expected to be much lower than an average high volume mass end car, not to mention the high volume generating motorcycles where the cost of borrowing is usurious.
Apart from upper middle class, the middle class is also looking forward towards flashing their bold lights and heavy style by opting for sport bikes which have become a so called necessity for today’s youth. Bike companies like Ducati, Yamaha, Honda, Suzuki and Bajaj (which has a tie up with Kawasaki) have been predominant in the Indian market.
Now with fuel efficiency and price wars being hallmarks of a motorcycle industry in a country like India, what drives companies to invest in the nascent super bikes segment?
Suzuki Motors India sold 100 units of Hayabusa and around 80 units of Cruiser since the launch last year. Bikes like Kawasaki start from Rs 3 Lakh and can go upto Rs 20 lakh, which are about 5-40 times the size of the general bikes we usually come across each day. Most customers opt for such bikes on cash payments and some do take it on an auto loan, so as to distract the income tax authorities.
Financing such luxury bikes are not often defaulted because they are offered at lower interest rates, and moreover, the comfort option is more available to the customer, who wants to keep the bike. In general, banks and finance firms offer loans at sub 10% level for super bikes and offer over 90% of the total cost of the purchase as loan.
With interest rates ranging from 18-22% for general bikes, the luxury bikes carry an interest rate as low as 10%. There is also more risk involved as that segment largely involves an average consumer some of whom may not have the wherewithal to pay back instalments in time and the financing firm could be stuck with a second hand vehicle that has low resale value.
Consumers in the luxury car market share are also increasing at a considerable rate. Most consumers who opt for a luxury vehicle, go for a partial payment option rather than going for a one time payment in order to avoid Income Tax Department’s scrutiny. While Mercedes has tied-up with HDFC Bank for providing financial assistance to consumers, BMW has started BMW Financial Services to facilitate customers with convenient financing options.
Moreover, it is a low risk category, more banks are coming forward to provide financing options at attractive rates. Even, the fluctuation in the interest rates are not going to affect these consumers because, the interest rate normally increases by maybe 1% or 2%.