Interest rate hike to hurt Automotive sales

ALL IS NOT WELL for the Indian auto industry. Firstly the high petrol prices, increase in raw commodity prices and RBI’s announcement f increasing the interest rates. This could only make the car makers more frustrated who is already selling cars with huge discounts to lure buyers. The Indian auto industry sales dropped in June and with the current scenario it could get only worse.

Either the car makers have to come up with some new solutions or the government should ease the interest rates which could help increase the buyers confidence.

Official press release

The 50 bps hike in the interest rates announced by RBI could hit passenger vehicle sales very hard. This was stated by Dr. Pawan Goenka, President, Society of Indian Automobile Manufacturers (SIAM).

The auto industry is already reeling under the pressure of high finance cost, high commodity prices and high fuel prices.  The growth rate of the PV sales has dropped from about 33% last year to about 9% during the last quarter.

Although some moderation in the growth rates was expected, the moderation has been far more than forecasted, to a large part due to the successive increases in the interest rates that have made it more expensive for the customers to purchase vehicles. High interest rates lead to postponement of vehicle purchase which will have a negative impact on the short to medium term sales.

SIAM has already scaled down it passenger vehicle sales forecast for this year from 16-18% to10-12%. We will have to wait and see the response by the Banks to this latest interest rate hike to assess the real impact on the market, said Dr. Goenka.