RBI rate hike will make car loans more expensive (FADA)

Chenai: The auto industry is still not out of the woods and the Reserve Bank of India’s (RBI) decision to raise the repo rate by 45 basis points will make auto loans expensive, a senior Federation official has said. automobile dealer associations (FADA). .

Comparing auto sales in April 2022 to those in April 2019, FADA Chairman Vinkesh Gulati said the sector was still not off the hook as overall retail sales declined. less than 6%.

Apart from PV (passenger vehicle) and tractors, which have experienced strong growth of 12% and 30%, two/three wheels, utility vehicles have not yet become green, these categories having fallen by minus 11%, 13 % and 0.5%. percent, respectively, Gulati said.

“April (2022) saw automotive retail sales figures similar to March 22. While the yearly comparison to April 21 shows all categories in green with a high rate of growth, it is important to note that April 21 and April 20 were affected by the nationwide lockdown due to phases 1 and 2 of the Covid wave which saw no negligible activity, therefore a better comparison will be with April 2019 which was a normal pre-covid month,” Gulati said.

He said the RBI’s untimely announcement of a 45 basis point repo rate hike caught everyone off guard. “This move will reduce excess liquidity in the system and make car loans expensive,” he added. While the passenger vehicle segment may be able to absorb this shock due to long wait times, the two-wheeler segment is already reeling from an underperforming rural market, rising vehicle prices and high fuel costs. High interest rates for auto loans due to the RBI move will be a further blow for this segment.

Certainly, the move will slow the speed of auto retail and further dampen sentiment, Gulati said. On the other hand, private consumption is regaining ground, supported by a recovery in contact-intensive services and an increase in discretionary spending. “With the continuation of the Russian-Ukrainian war and the shutdown of China, the global automotive industry continues to face a shortage of supply as the shortage of semiconductors, high metal prices and the shortage containers are prevailing, so customers in the PV segment continue to experience a long waiting period,” Gulati said.