Japanese vehicle maker jumps into microfinance in India | Daily News

Japanese vehicle maker jumps into microfinance in India

Terra Motors electric three-wheeled vehicles in India.
Terra Motors electric three-wheeled vehicles in India.

TOKYO -- Tokyo-based startup Terra Motors, a manufacturer and distributor of electric three-wheeled vehicles, recently launched a financial subsidiary in India. Its goal is to use microfinance to lift buyers’ incomes and boost vehicle sales. But will a Japanese startup be able to thrive in India as the coronavirus spreads at a record pace?

An electric vehicle exhibition was held in India’s capital of New Delhi in early August. While many domestic companies had their own displays, people packed into Terra Motors’ booth, where alongside its vehicles the company showed off the services of the financial business.

At the end of July, just before the exhibition, Terra Motors established Terra Finance in India as a financial subsidiary. “Our main target is low-income earners, so financial support is essential,” said Terra Motors CEO Akihiro Ueda at the exhibition center.

Terra Motors’ mainstay electric three-wheeled vehicles have a maximum speed of 25 kph and can carry four passengers plus the driver. Taxis and other commercial transport vehicles are in demand, but the high price of about $1,800 creates a bottleneck. According to Terra, driving a three-wheeled taxi can earn a person several thousand dollars a year, but nearly half of India has an annual household income of less than $5,000. Many people do not have the money for an initial payment on a vehicle.

Terra Finance uses funds borrowed from banks to cover these initial purchases. It provides loans to people looking to buy a vehicle, and they repay the loans using their daily earnings as cab drivers.

Major Japanese manufacturers that have expanded into India in the past, like Suzuki and Honda, have mainly provided loans through local institutions.

“There are already local financial institutions that specialize in this field,” said an employee at a major Japanese automaker. “We decided that we should focus on product development, rather than going to the trouble of providing our own financial services.”

In contrast, Terra Finance is 80% owned by Terra Motors, and the remaining 20% by local lender Vedika Credit Capital. Terra Motors leads the financial operation, and a local consultant noted that it is rare for a Japanese manufacturer to be so involved in the financial business.

Terra Motors was founded in 2010 by Chairman Toru Tokushige, who originally worked at a Japanese insurance company before moving to a venture support company in the U.S. The company developed its electric two- and three-wheeled vehicle businesses, keeping its headquarters in Japan while focusing on growing its business in emerging countries in Asia. Ueda, who took over as president in 2019, came from Sharp, and Chief Technology Officer Masanori Takahashi came from Honda. (www. asia.nikkei.com)


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