Auto News

Car makers fear further drop in demand post RBI rate hike

By Motortrend India Staff   |   26 July,2011

Car-makers in India, who have been witnessing one of the slowest sales growth rates in over two years, on Tuesday said the RBI’s decision to hike key rates will deal a further blow, as financing costs will rise.

“It seems that now auto loan rates will go up and this is going to impact us definitely. Growth rate has already come down,“Honda Siel Cars India Senior Vice-President (Sales and Marketing) Jnaneswar Sen said told PTI.

He said fundamentally, the economy is growing and the market will continue to grow, but the growth rate may be low.

Expressing similar views,General Motors India Vice-President P Balendran said: “The rate hike is going to further slow down the market. The Indian automobile market is already under a tremendous amount of pressure. We were expecting this time the rates to be unchanged, but the RBI has other priorities as well.“

Maruti Suzuki India Chief Financial Officer Ajay Seth said: “Market condition continues to be sluggish and the rate hike by the RBI by 50 basis points will have an effect on consumer sentiment.“

When asked whether the auto sales growth rate would further come down, Sen said: “It is difficult to say at this moment, because usually the market picks up during August-September on account of the festive season.“

IHS Automotive India Managing Director Deepesh Rathore, however, said the rate hikes will dampen demand even during the festive season.

“It (rate hikes) will have an impact on the auto market. This festive season will not be as good as that of last year’s. We hope the interest rates should stabilise by the end of this calender year. We are not very optimistic for the next few quarters for all car manufacturers,“ he said.

Car sales in the domestic market recorded their slowest growth rate in 27 months in June this year at 1.62 per cent, mainly due to hikes in lending rates and production losses due to the 13-day strike at Maruti Suzuki’s Manesar unit.

Car sales in the country stood at 1,43,370 units in June this year, as against 1,41,086 units in the same month last year, as per figures released by theSociety of Indian Automobile Manufacturers (SIAM). This was in sharp contrast to the near 30 per cent growth witnessed during the whole of last fiscal. It was also the slowest growth rate since March, 2009, when sales increased by just 1.16 per cent.

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