RBI rate hike worries automakers

Recent reports in Indian automobile market suggest that the recent increase of 25 basis points in key interest rates by RBI is going to dip the car sales in India which is already going through bad weather. Mahindra Mahindra (MM) President, Auto Farm Equipment Sector, Pawan Goenka said that the RBI announcement will send a negative proposal to buyers, which in turn will drift consumers away from the dealers. Mr. Goenka is also the President of the SIAM.

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It is worth mentioning that the Reserve Bank of India increased the key interest rates by 25 basis points , which accumulates to the tenth raise since March, 2010. The RBI has amplified the lending (repo) rate by 25 basis points to 7.50 per cent and the borrowing (reverse repo) rate by a similar margin to 6.5 per cent. On this matter, General Motors India Vice-President (Corporate Affairs) A Balendran said that Indian car Industry is already feeling the heat of recent petrol hike and this latest raise will further lower the sales figures. He further added that car sector is already going down owing to the higher input rates and increase in fuel prices and another hike in interest rates will do no good for the sector.

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Speaking on the issue of RBI hike, Fiat India President and Chief Executive Officer Rajeev Kapoor said that in coming future, this hike is going to hit the car sales in India. He added that industry is not doing well currently and this move of RBI is going to hamper the future prospects. According to SIAM, accumulative sales of cars across all segments experienced a growth of 13.40 percent to 13, 70,786 units in May this year, compared to 12, 08,820 units in the same month in 2010.

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