India Auto Finance Market Size and Forecast (2019-2030)

Executive Summary

The Indian auto finance market has witnessed strong growth in recent years, registering a CAGR of 11.49% from 2019 to 2024 and a Y-o-Y registering double digit growth. This expansion is largely fueled by increasing automobile demand, particularly in tier II and III cities, where consumers are increasingly opting for longer loan tenures to purchase higher-priced vehicles. Car ownership is no longer confined to metropolitan areas, with 75% of consumers in these cities relying on financing options to fulfill their aspirations.

Despite this growth, the scope of auto financing in India remains relatively limited compared to Western markets, where financing agencies offer additional services such as insurance, warranty, and maintenance. In India, while traditional auto financing dominates, the luxury car segment is witnessing a surge in demand for high-value auto loans. Major banks and non-bank lenders, including HDFC Bank, ICICI Bank, and captive financiers of luxury automakers like Mercedes-Benz and BMW, are experiencing a sharp increase in luxury-car financing.

Urbanization and infrastructure development are further boosting the demand for automobiles, strengthening the auto loan segment. Public sector banks and private banks dominate the market by loan value, while public sector banks and non-banking financial companies (NBFCs) lead in terms of loan volume. As private consumption rises across the country, auto loan penetration is deepening, particularly in smaller towns, which have become key growth drivers for auto financing.

However, challenges persist in alternative ownership models such as leasing and subscription, which have struggled to gain traction in India. Leasing penetration stands at just 1.5%, while subscription models account for a mere 0.1% of the market. The limited adoption of these alternatives is attributed to regulatory challenges, logistical complexities related to insurance and maintenance, and a cultural preference for outright vehicle ownership.

Over the past decade, the Government of India has introduced various initiatives to promote EV adoption, including the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME) scheme, which has allocated significant subsidies for EV purchases and charging infrastructure development. State-level policies have also become instrumental in shaping India's EV financing landscape, with various states implementing their own EV policies to encourage adoption and manufacturing.

Despite strong policy support, EV financing in India faces challenges related to high upfront costs and limited financial products tailored for EV buyers. However, the market is evolving, with financial institutions introducing innovative loan structures and lease financing options to support EV adoption. Public and private sector investments in charging infrastructure and battery technology are expected to further enhance consumer confidence, making EV financing a critical enabler of India’s transition towards sustainable mobility.

As the market continues to evolve, the increasing demand for automobiles, particularly in tier II and III cities, along with the rise of electric vehicles, presents significant opportunities for growth in the auto finance sector in India.

Future Outlook of India Auto Finance Market:

India's auto finance market is poised for significant expansion, with a projected CAGR of 16.35% from 2025 to 2030, driven by the rising adoption of electric vehicles (EVs) and government incentives supporting EV purchases.

While a temporary slowdown is expected in 2025 as passenger vehicle (PV) sales are projected to grow in the low single digits, two-wheeler sales by 6-8%, and tractor sales by 3-5%, the long-term outlook remains positive. The commercial vehicle sector is set to benefit from government-led infrastructure investments, further supporting market growth. Additionally, India's expanding middle class population, expected to rise to 60% of the population by 2047, will drive higher vehicle ownership. Rising income levels, rising urbanization, coupled with an annual GDP per capita growth rate of nearly 10%, will further enhance affordability and sustain demand for auto financing.

The used car market is also emerging as a key growth driver for India's auto finance sector. With affordability concerns and an increasing preference for certified pre-owned vehicles, the used car segment is gaining traction. Financing penetration in this market is steadily rising as banks and non-banking financial companies (NBFCs) introduce tailored loan products to meet the growing demand.

The transition toward sustainable mobility will play a transformative role in shaping India's auto finance industry. If FAME II and other government initiatives achieve their targets, EV penetration could reach 30% for private cars, 70% for commercial cars, 40% for buses, and 80% for two- and three-wheelers by 2030. As a result, demand for EV-specific loan products will increase, reshaping financing models and attracting greater investment in charging infrastructure financing. These developments will continue to drive the long-term evolution of India’s auto finance market, positioning it for sustained growth.

Scope of India Auto Finance Market Report:

Makreo Research has recently released a detailed study titled “India Auto Finance Market Size and Forecast (2019-2030)”. This report provides a comprehensive analysis of the historical performance and current state of India's auto finance market, highlighting key factors influencing its future growth.

It begins by examining key insights into the automobile industry, including recent sales and production trends. The report then explores vehicle ownership patterns, offering in-depth insights into various market segments and demographic trends. It further presents a detailed study of the auto finance market, analyzing different segments, profiling key players, assessing their financial performance, and evaluating the competitive landscape.

Additionally, the report provides a forward-looking perspective, identifying both challenges and opportunities. Overall, it offers stakeholders a clear understanding of current market conditions, future growth prospects, and strategic decision-making opportunities in India’s auto finance sector.

Period of Study:

• 2019 - 2024: Past and Present Scenario
• 2024: Base year of study
• 2025– 2030: Future Outlook

Market Assessment

The report provides an in-depth analysis of the Indian auto finance market, covering key aspects such as market revenue, forecasts, and historical and current performance. It examines interconnected factors such as vehicle ownership trends, and their impact on the market. Additionally, the report explores challenges, opportunities, and future prospects of the market. It also includes a detailed segmentation analysis based on the type of vehicle financed, lender type, vehicle category (new or used), fuel type, loan tenure, and regional distribution.

Market Segmentation:

• By Type of Vehicle Financed
• By Lender Type
• By Vehicle Category
• By Fuel Type
• By Loan Tenure
• By Regions

Competitive Landscape

This section details the market comparison and share of key players in India auto finance market, highlighting recent investments, mergers and acquisitions (M&A), and funding activities. It also includes detailed profiles of selected industry players.

Companies Covered:

• State Bank of India
• Axis Bank Limited
• Industrial Credit and Investment Corporation of India Bank (ICICI Bank)
• Tata Capital Limited (TCL)
• HDB Financial Services Ltd.
• Mahindra & Mahindra Financial Services Limited
• Muthoot Finance Ltd.
• Muthoot Money Limited
• Cholamandalam Investment and Finance Company Limited (Chola)
• Sundaram Finance Limited
• Kotak Mahindra Prime Limited (KMPL)
• Toyota Financial Services India Limited
• Bajaj Finance Limited
• Hero FinCorp.
• Cars 24 Financial Services Private Limited
• Maruti Suzuki True Value
• Maruti Suzuki Smart Finance
• Droom Technology Limited (Droom Credit)
• Blue Carz

Key Questions Answered

1. How has India’s auto finance market changed over the years?

2. Are more people in India buying vehicles on loan today?

3. How popular are electric vehicles (EVs), and how does their financing work?

4. Are personal loans or auto loans more common in India?

5. What are the biggest challenges in getting EV loans?

6. How have car prices in India changed over time?

7. Which types of auto loans are most popular?

8. Who are the major auto finance companies in India?

9. How do top vehicle finance companies compare with each other?

10. What new opportunities are coming up in the auto finance market?" Show more