According to analysts, the RBI’s decision to cut interest rates to 6.75 percent from an earlier 7.25 percent could hold the key to the recovery of the Indian automotive industry. The fall in interest rates means loans are set to become more affordable and this could see a spike in consumer demand for automobiles during the festive season. 

 

Nationwide automotive sales have not shown any significant improvement in the past few months. Despite a growth in car sales for 10 straight months, two- and three-wheeler sales fell owing to faltering demand caused by erratic monsoons. 

 

With large public and private sector banks already announcing the transmission of lower interest rates, rural and semi-urban customers can now have some respite, especially after being affected by this year’s deficient rainfall. Easy loans could impact the two-wheeler and farm equipment sales in the last months of this calendar year due to resurgent demand from these areas. Two-wheeler and LCV sales had fallen to 2.9 percent and 7.41 percent, respectively, in August. Scooter sales though, had risen, recording a 15.66 percent growth year-on-year. 

 

Thanks to the anticipated transmission of lower interest rates, sales of passenger cars could grow even faster and those of light commercial vehicles could recover as well.