Automotive Manufacturers - Car, Bike Manufacturers Fear a Slump in Sales After RBI Move
It's getting worse for the car and bike makers. Amid slowdown fears due to ever-rising consumer interest rates and spiraling inflation, the latest hike in repo rate and CRR by RBI has come as a further blow to any chances of an immediate reversal in situation.
While banks consider another hike in interest rates following the tightening of liquidity, leading automobile companies like Maruti, Hyundai and Hero Honda are worried that this will further dampen the scenario.
€With interest rates all set to go up even further, there is a tendency that people may postpone purchases for some time. The latest step comes as a dampener for the two-wheeler industry,€ said Ravi Sud, CFO at Hero Honda.
Bike industry sales had fallen as much as 12% last fiscal, primarily led by high interest rates and poor retail financing as banks were reluctant to lend to the sector due to high delinquencies. Sud said the combination of negative factors like high interest rates, inflation and tight retail lending are posing a question mark on the recent sales revival in the motorcycle industry. €We have to wait and watch for the next couple of months to get a clear picture,€ he said.
Interest rates on two-wheelers financing are hovering at 22-23% and have seen on upward march over the last two years. The average interest rate on car loans hovers around 12-14%. Car companies are also a worried lot because of the high interest rates that are not only impacting new purchases but are also hitting some of their key vendors, who are finding it difficult to fund expansion plans due to high borrowing rates.
Ajay Seth, CGM at Maruti Suzuki, reiterated that the high interest rates would have a negative impact €in the short term€. €We understand the government's concern on high inflation and the steps to cool demand. While this may impact sales in the short-term, we are confident that things may stabilize when inflation is controlled. However, if the same situation persists for one year and interest rates continue to climb up, then the industry may be headed for a slowdown,€ Seth said.
A senior official at Hyundai also said there could be a slump in sales if the negative factors continue. €It will affect the growth of the car industry,€ the official said.
dilip Chenoy, Director General of Society of Indian Automobile Manufacturers (SIAM), added that given the present circumstances, 2008-09 would be a challenging year for the automobile industry. €We just hope that inflation is tamed because that would come as a breather for the industry and sales,€ Chenoy said, adding that Siam will review the state of the industry in a meeting early next month.
HEADING
FOR A SLOWDOWN
Auto loan interest rates are likely to further go up following repo, CRR hikes by RBI Leading Companies like Maruti, Hyundai fear it will impact their sales adversely Consumer sentiment is already weak due to high inflation, downturn in the stock markets Consumers should not expect much cushion from companies as they are already fighting high input costs
While banks consider another hike in interest rates following the tightening of liquidity, leading automobile companies like Maruti, Hyundai and Hero Honda are worried that this will further dampen the scenario.
€With interest rates all set to go up even further, there is a tendency that people may postpone purchases for some time. The latest step comes as a dampener for the two-wheeler industry,€ said Ravi Sud, CFO at Hero Honda.
Bike industry sales had fallen as much as 12% last fiscal, primarily led by high interest rates and poor retail financing as banks were reluctant to lend to the sector due to high delinquencies. Sud said the combination of negative factors like high interest rates, inflation and tight retail lending are posing a question mark on the recent sales revival in the motorcycle industry. €We have to wait and watch for the next couple of months to get a clear picture,€ he said.
Interest rates on two-wheelers financing are hovering at 22-23% and have seen on upward march over the last two years. The average interest rate on car loans hovers around 12-14%. Car companies are also a worried lot because of the high interest rates that are not only impacting new purchases but are also hitting some of their key vendors, who are finding it difficult to fund expansion plans due to high borrowing rates.
Ajay Seth, CGM at Maruti Suzuki, reiterated that the high interest rates would have a negative impact €in the short term€. €We understand the government's concern on high inflation and the steps to cool demand. While this may impact sales in the short-term, we are confident that things may stabilize when inflation is controlled. However, if the same situation persists for one year and interest rates continue to climb up, then the industry may be headed for a slowdown,€ Seth said.
A senior official at Hyundai also said there could be a slump in sales if the negative factors continue. €It will affect the growth of the car industry,€ the official said.
dilip Chenoy, Director General of Society of Indian Automobile Manufacturers (SIAM), added that given the present circumstances, 2008-09 would be a challenging year for the automobile industry. €We just hope that inflation is tamed because that would come as a breather for the industry and sales,€ Chenoy said, adding that Siam will review the state of the industry in a meeting early next month.
HEADING
FOR A SLOWDOWN
Auto loan interest rates are likely to further go up following repo, CRR hikes by RBI Leading Companies like Maruti, Hyundai fear it will impact their sales adversely Consumer sentiment is already weak due to high inflation, downturn in the stock markets Consumers should not expect much cushion from companies as they are already fighting high input costs