Auto sector cheers RBI rate cut as 'festival gift'

Welcoming rate cut by RBI, automobile manufacturers on Tuesday said it has come as a "festival gift" that would help the struggling sector meet 15-20 per cent sales growth during the upcoming festive season.

"This is a festival gift. Traditionally, during the festive season, the auto industry witnesses sales growth of 15-20 per cent, which was missed in the last couple of years. This reduction in rate by the RBI has assured that the growth will be achieved," Hyundai Motor India Ltd (HMIL) Senior Vice President (Marketing and Sales) Rakesh Srivastava told PTI.

He said the rate cut gives a "positive signal" towards enhancing optimism in the sector, where 65 per cent of car sales are financed. A reduction in interest rates will reduce cost of ownership and help the automakers get more customers. Expressing similar views, Maruti Suzuki India Executive Director Marketing and Sales R S Kalsi said: "On the whole, it gives a good signal to customers. The market so far has been moving very slowly but with this (rate cut) sentiments will improve. It gives the much-needed boost to the market in the pre-festive season."

Automakers generally expect higher sales during the months of October and November when Durga Puja, Diwali and other festivals are celebrated.

Welcoming the rate cut by RBI, Hero MotoCorp Chairman and MD Pawan Munjal said: "It has come at an opportune time as it will help in raising customer sentiment during the festival season."

Mahindra & Mahindra President and Chief Executive (Automotive) Pravin Shah said: "If the entire rate cut is passed on to customers by lending institutions, it will bring momentum in auto sales growth, specially in the small commercial vehicles segment which has been witnessing double digit decline in sales for a long time."

In its fourth bi-monthly monetary policy for the current fiscal, RBI today cut its policy rate from 7.25 per cent to 6.75 per cent -- the lowest in four-and-half years. However, some auto industry players feel that the rates could have been cut further.

"Our anticipation was of higher reduction in interest rates of about 100 bps," Srivastava said, adding that for sustained growth and to attract buyers, specially in the price sensitive entry-level segments, lower interest rates are needed so that customers get lower EMIs.

He further said that lower interest rates would also have helped customers who are looking to upgrade with an exchange programme and restructure their EMIs.