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Auto Industry Shocked By Repo Rate Hike
General Motors India Vice-President P Balendran while speaking about the Rbi's decision to increase repo rates said: “The market has already slowed down. This latest hike will further dampen the auto sector. It will dampen demand during the festive season. It was never expected. The RBI should have given a break, at least this time."
The Reserve Bank has raised the repo rates by 25 basis points as it tries to fight raising inflation. The car industry has already been troubled by frequently increasing petrol prices. This double blow of petrol prices increasing by another Rs.3.14 and the increase in repo rates by RBI will be a tough challenge to the industry. Car sales are no longer buoyant and even companies which have a dominant market position are offering discounts to increase sales.
The festive season which most carmakers were hoping would give the much needed jump in sales will turn out to be flop as customers will prefer not to buy or postpone car purchases due to increased interest rates. All major carmakers have already launched new models or will be launching then within the next 45 days in a bid to attract buyers. But the current market scenario will continue to be grim.
Mr Balendran explained the importance of the festive season for the car industry by stating: “Usually, every year we target around 20 percent jump in sales during the festive season, but this year we expected only 5 percent spike due to repeated interest rate hikes. But now it will be difficult to achieve even this 5 percent growth in sales."
Fiat India, another carmaker that has seen a severe drop in sales has also expressed his displeasure about the increase in repo rates. Fiat India's president and chief executive, Rajeev Kappor said: “The industry is already under tremendous pressure and this fresh step by the central bank will further aggravate the situation. We never expected this. It's going to further dampen the festival sales. The RBI step will hurt the overall auto industry."
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