Car makers to feel the pinch of RBI's rate hike
RBI's rate hike could not have come at a worse time for the car industry that is already witnessing a slip in demand as expensive financing and costlier fuel turn people away from showrooms. Companies and analysts said demand could see a severe dent from the 30%-plus highs of last fiscal as banks further jack up interest rates and EMIs become fatter.
This is the ninth successive hike for interest rates since March last year, and interest rates have slowly and steadily been inching up, hovering around the 13% mark now. "This is one of the highest levels in recent times. In fact, retail interest rates have never been so high in the last six to seven years," Arvind Saxena, marketing and sales director of Hyundai India , told TOI.
Saxena said the situation was getting difficult. "Already enquiries (at dealerships) have reduced and the conversion rate too has slowed down. Any further increase will make things worse."
While car sales grew by 30%-plus in 2010-11, the outlook for this fiscal was pegged at nearly half of this. Market players say even this looks difficult now as not only are interest rates rising but so is the price of fuel as well as that of vehicles, which are becoming dearer on higher inputs.
Jnaneswar Sen, sales and marketing head at Honda Siel Cars, said sentiment was getting bad. "The effect is now being felt on retail. As the situation worsens, people may postpone buying decisions, especially those who are going in for a replacement or an additional car," Sen said.
"The market is already under pressure and this will certainly have an adverse impact," said Mayank Pareek, managing executive officer of Maruti Suzuki India .
Sandeep Singh, deputy MD (sales and marketing) at Toyota Kirloskar said, walk-ins at showrooms were going down. "Footfalls have been impacted and customers may think twice before paying higher EMIs."
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