RBI rate hike likely to slump car sales in India

The Indian car market has not recovered from its unceasing slowdown with June recording the lowest sales in the past two years; apparently now, it is to face yet another blow with the RBI’s decision to further increase the financing costs. Mr Jnaneswar Sen, the Senior Vice-president of Sales and Marketing of Honda India, has reportedly expressed his concern that, there is going to be a huge impact on the car market which is already suffering with low sales growth due to the RBI’s decision on increasing the interest rates on the loans including the car loan.

Apparently, with the country’s economy growing, the car market will continue to grow, however, the growth might be slow due to the factors like the volatile petrol prices and interest rates, which will affect the sales growth negatively. Seemingly, Mr Balendran of General Motors India also indicated similar views on the subject saying that, the car market is undergoing tremendous pressure due to the high interest rates; and hopes that the RBI might reconsider to let the interest rates remain unchanged, but at the same time, the RBI have to consider other aspects as well.

Mr Ajay Seth of Maruti Suzuki India is reported to have said that, the RBI's decision of increasing interest rates by 50 basis points will definitely influence the already sluggish car market negatively and Mr Deepesh Rathore of IHS Automotive India shares similar views. However, Mr Jnaneswar Sen of Honda Siel cars is believed to have shown some positive indication commenting that, it is too early to predict the impact post the interest rates hike, as the car market usually picks up during the months of August-September.

The car sales apparently have suffered the most in the month of June, with mere 1.62%, the lowest growth rate in the past 27 months, due to the factors like interest rates hike and petrol price hike, not to mention the production loss due to the 13-day Maruti India’s employee strike at the Manesar Plant. A similar situation had been faced by the Indian car market in March 2009, when the growth rate had been only 1.16% and then followed by a huge leap in the growth rate recording 30% the next fiscal year.

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