Auto loan performance in India worsened in the second quarter of 2018 compared with the first quarter, with higher fuel prices weighing on the ability of auto loan borrowers to repay debt, Moody’s Investors Service said in a report.
“We expect auto loan delinquencies to remain at current levels or deteriorate slightly for the rest of 2018, with the effects of higher fuel prices on auto loan borrower counter-balanced by strengthening economic activity to some degree,” it said.
The performance for auto loan asset class showed some deterioration in India, with higher fuel prices weighing on the ability of borrowers to repay debt, said Vincent Tordo, a Moody’s Analyst.
Moody’s said the issuance of Indian asset backed securities (ABS), backed by commercial vehicle, construction equipment and auto loans, declined to about ₹250 billion in the fiscal year ended March 2018 from ₹265 billion in the fiscal year ended March 2017.
Commercial vehicle sales in India increased by 51.6% in the three months ended June 30, 2018, compared with the same period a year earlier.
It said the sales of heavy commercial vehicles jumped by 83.6%, while light commercial vehicle sales increased 36.5% compared with the same period in 2017.
“Loans on commercial vehicles account for the highest percentage of assets in Indian auto ABS that we rate.The marked improvement in light commercial vehicle sales reflects higher demand, particularly in rural areas, as well as the need for fleet replacement, and demand for the delivery of goods bought online,” Moody’s said in its report. “Sales of heavy commercial vehicles picked up considerably in recent months, driven by an overall increase in freight-intensive activities,” it added.