Automakers are pushing deeper into vehicle financing as a growing reliance on loans turns customer credit into a lucrative business opportunity. From Honda Motor Co. and Eicher Motors Ltd to established players such as Mahindra & Mahindra Ltd and TVS Motor Co., manufacturers are expanding captive finance operations in a bid to boost sales, strengthen customer loyalty and capture a larger share of profits from the country’s rapidly growing .
While Honda Motor and Eicher Motors have recently decided to enter retail financing, Escorts Kubota, TVS Motor and Mahindra and Mahindra are all doubling down in the space. The twin aims: open up a fresh revenue stream, and ensure a seamless sales process.
“The basic purpose of captive finance is to help the main business in growing market share and increasing volume,” Bharat Madan, chief financial officer of tractor maker Escorts Kubota, said at an earnings call on 7 May. The expansion of retail financing is one of the factors which helped sales conversion of prospective customers, the company said, prompting it to double down on the business.
The Faridabad-based company, with a market capitalization of over ₹30,000 crore, had allocated ₹700 crore for vehicle finance in 2023. Of this, ₹500 crore will be invested over the next 12 months as it looks to expand its loan book. At the end of FY26, its loan book had reached ₹100 crore.
Japan’s Honda Motor, which sells cars and two-wheelers in India, is following a similar strategy to grow its vehicle sales, as part of a global strategy on captive finance.
“Honda will strive to expand sales through various measures including the utilization of its new captive finance company in India, which is scheduled to become operational before the end of the current fiscal year ending March 31, 2027,” it said on 14 May. Explaining the rationale, Kunal Behl, vice-president of marketing and sales at Honda Cars India, said at a press conference on 20 May that the company is launching the business to make loans easy to get.
“The aim is to support financing of customers, having easy availability of finance because that’s the Indian market. 75% of customers are still taking financing,” Behl responded to a question of how such a business helps the firm.
is a highly competitive businesses, with a range of private and state-run banks as well as non-banking finance companies such as Shriram Finance, L&T Finance, Bajaj Finance and HDB Financial Services offering loans for a range of new and pre-owned vehicles. According to estimates of market intelligence firm iMarc, India’s vehicle financing market, which stood at $28.47 billion in 2025, is expected to reach $52.01 billion by 2034.
The finance focus comes at a time when India’s automobile sales has across categories, including two wheelers, tractors, commercial vehicles and cars. According to the Federation of Automobile Dealers’ Association, in FY26, two wheeler sales grew 13% to 21.4 million, passenger vehicle sales grew 13% to 4.7 million, tractor sales grew 19% to 1.05 million and commercial vehicle sales grew 12% to 1.06 million units.
Experts noted that one of the things such a business enables is that it can help in controlling the entire sales experience for customers.
“A captive finance business can help keep brand present through the customer’s ownership journey, well beyond the point of sale. It would also give OEMs full control over purchase journey from start to finish, keeping customer relationship within the brand,” Poonam Upadhyay, director at Crisil Ratings, said.
Gurugram-based Eicher Motors has announced a 50-50 joint venture partnership with Volvo Financial Services (VFS) for financing, leasing and other financial services for customers in a bid to expand their business in the Indian market. “It presents an opportunity for Eicher to operate in an important segment of the value chain using financing as a lever for a superior customer experience,” Eicher Motors vice-chairman Vinod Aggarwal told analysts and investors at a 22 May earnings call.
“And the other good thing is that the VFS — they do only captive financing. So, they will do only the VECV (Volvo Eicher Commercial Vehicles) or Volvo products or Royal Enfield at a later date. So therefore, I think it’s a good business opportunity and at the same time also as a sales aid,” Aggarwal said.
While new entrants try to expand in the market, larger automakers like TVS Motor Co. and Mahindra and Mahindra, which already have financial services arms, are expanding their scope.
Mint reported on 20 May that The TVS Group has been steadily expanding its financial services footprint beyond vehicle loans, and has made strategic investments in insurance as well as asset management. The company operates its financial services businesses through various entities, including TVS Credit Services that specialises in two-wheeler loans.
TVS Credit saw its book size increase by 15% year on year to ₹30,631 crore, supported by improved consumption sentiment and traction across all retail financing segments, KN Radhakrishnan, director and chief executive at TVS Motor, said during the company’s March quarter earnings call on 13 May. The Mahindra management told investors on 5 May that it is looking to expand financing to small businesses, and mortgages, tapping the conglomerate’s different businesses spanning across auto to real estate.
“We now hope to be able to drive that further, diversify further into mortgage, into SME, have fee income play a bigger role, and really create a stronger business where in rural and semi-urban we want to be the financial provider of choice,” Anish Shah, group chief executive at Mahindra and Mahindra, said.
