Car sales to cruise along, bikes likely to slow down
NEW DELHI: The hardening of interest rates by RBI to tame inflation could mean higher consumer lending rates for auto buyers, though analysts say that an adverse impact may not be felt immediately but only if further rate hikes happen. According to auto industry analysts, the passenger vehicles industry seems to be insulated from the current action even if banks decide to go for hiking interest rates on car and SUV loans.
Any perceptible impact will be felt only in the two-wheeler category, which is already in the grip of a slowdown, and will see a further dampening in consumer sentiment if EMIs start getting expensive. Auto retailers body Federation of Automobile Dealers Association (FADA) expressed concerns over the measures initiated by the central bank.
“RBI’s move of increasing repo rate by 40 bps has clearly taken everyone off guard. This move will apply brakes and dampen the sentiments further,” FADA president Vinkesh Gulati said, adding that the rural markets for motorcycles and scooters will get further depressed.
Rohan Kumar Gupta, VP at ICRA, said two-wheelers would start feeling the pinch if EMIs and interest rates continue to go up. “Inflation has been a big concern and RBI had to take counter measures. There is fear that the present hike is the start of an upward curve where interest rates will progressively be hiked, and lending costs will increase. If this happens, then the two-wheeler market will surely be impacted.”
However, while two-wheeler industry stays edgy, the car and SUV makers are still sitting comfortable as they have a delivery backlog to catch up, and thus do not fear a squeeze in order book or demand.