Auto industry to get hit by latest RBI move

The Reserve Bank of India (RBI) has raised repo rate by 50 basis points to 8 per cent and reverse repo to 7 per cent in its policy meet to arrest rising inflation in the economy. This step will lead to the rise in lending rates. The automobile industry, which is already witnessing a slowdown is set to face a tougher time.

Pawan Goenka, President, Society of Indian Automobile Manufacturers says “The 50 bps hike in the interest rates announced by RBI could hit passenger vehicle sales very hard.”

“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 percent last year to about 9 percent 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”, adds Goenka.

SIAM has already scaled down it passenger vehicle sales forecast for this year from 16-18 percent to10-12 percent.