Auto industry : The Reserve Bank of India’s (RBI) decrease in the key benchmark rate is projected to boost market mood and generate higher demand in price-sensitive two-wheeler and entry-level automobile segments, according to automotive industry players on Friday.
Industry players highlighted that the rate drop, which comes shortly after the income tax relief offered to individuals, will have a favourable influence on the auto sector.
On Friday, the Monetary Policy Committee (MPC) led by RBI Governor Sanjay Malhotra cut the repo rate by 25 basis points to 6.25 percent. This was the first decrease since May 2020, and the first modification in two and a half years.
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Reducing rates at this time, following the recent Budget’s relaxation of income tax for individuals, would undoubtedly have a positive impact on the auto sector, as it will increase accessibility by lowering the cost of financing, thereby creating a favourable mood across the market,” The community of Indian Automobile Manufacturers (SIAM) President Shailesh Chandra said in a statement.
According to C S Vigneshwar, President of the Federation Of Automobile Dealers Associations (FADA), the proposed drop aligns with the Finance Minister’s recent declaration of 0% tax up to ₹12.75 lakh, increasing customers’ discretionary income.
He went on to say, “With auto loans becoming more affordable, we predict greater demand in the price-sensitive two-wheeler and entry-level automobile markets, which have borne the burden of significant price spikes and affordability worries.
“When combined, these approaches have the potential to reenergise previously trailing areas, allowing them to catch up with the overall market. FADA applauds the RBI for promoting growth while staying ‘neutral’ on inflation, and we believe that this rate drop would provide much-needed momentum to India’s auto retail industry in the coming months.”
Tarun Garg, whole-time director and COO of Hyundai Motor India Ltd (HMIL), stated, “Currently demand momentum is stable, and our dealers have approximately four weeks of inventory. The RBI has announced a 25 basis point cut in interest rates, which bodes positively for future demand sentiment.
Auto industry : The rate drop is also expected to increase demand in rural areas .
“We think that the rural participation will continue growing backed by strong measures focused on improving productivity, maintaining MSP and facilitating government backed loans to farmers via Kishan Credit Card,” Garg stated.
In addition, “Road connectivity continues to grow steadily, thus boosting rural demand,” referencing the fact that “the gap among so-called ‘rural’ and ‘urban’ is now shrinking and rural customer preferences are evolving at a very high rate” .
He stated that rural has been the cornerstone of HMIL strategy, particularly in recent years, and that “our rural contribution has witnessed constant increase. In addition, we are constantly growing our rural presence in high-potential locations, both in terms of sales and customer service.”
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