Shocked auto industry says RBI step never expected

The auto industry expressed shock at the latest Reserve Bank decision to hike key policy rates by 25 basis points today, saying the move will further dampen the already cringing demand and will pour cold water on the
festive season.

"The market has already slowed down. This latest hike will further dampen the auto sector. It will dampen demand during the festive season. It was never expected. The RBI should have given a break, at least this time," General Motors India Vice-President P Balendran told PTI.

The Reserve Bank raised its key rates by 25 bps points to 8.25% - the 12th hike since last March, in its bid to batten down inflation which stood at an elevated 9.78% in August.

"Usually, every year we target around 20% jump in sales during the festive season, but this year we expected only 5% spike due to repeated interest rate hikes. But now it will be difficult to achieve even this 5% growth in sales," Balendran added. Asked whether the company will increase car prices, he said, "we have not decided anything on it."

Fiat India also sees a significant impact on the sector following the RBI action.

"The industry is already under tremendous pressure and this fresh step by the central bank will further aggravate the situation. We never expected this. It's going to further dampen the festival sales," Fiat India President and Chief Executive Rajeev Kapoor said.

"The RBI step will hurt the overall auto industry," he said adding, the company has not decided anything on price hike.

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Rajkot-based three wheeler-maker Atul Auto also feels the rate hike will further affect demand. "Definitely, it will have an impact on the industry. The auto sector is already reeling under pressure due to high input costs and rising fuel prices and the steady hike in interest rates will affect sales," Atul Auto Director Vijay Kedia said.

However, he expressed the hope that the three-wheelerwill not be hit majorly by the rising interest rate.Pune-based Force Motors voiced concern saying that auto sales will be further impacted.

"Certainly, the move will have a negative impact on sales. The auto industry is in a slowdown right now and it will further curtail demand," Force Motors President (Personal Vehicles Division) Sanjeev Gargh said.

"Yesterday we had a steep spike in petrol price, and today we have a rate hike. That certainly is not good," he said.