Double shocker for car makers, government hikes petrol price after RBIs rate hike

Saturday 17 September 2011, 11:40 AM by Vikas Yogi

Amidst the descending car sales in the country, the car makers in India have shocked by the double whammy of RBI rates hike and petrol price hike, just a few weeks before the forthcoming festive season. It is to be mentioned here that RBI has hiked the borrowing rates recently that in turn will make the car loan interest rates even expensive. Just a day after the RBI’s shocking rates hike, the government decided to hike the petrol prices by a massive Rs.3.14 per liter, leaving no hope among the car maker to revive the sales in the festive season.

The double shocker came at time, when the industry has already been struggling with a fall in sales since last two consecutive months in July and August. After a dip of two months, the car sales in the Indian market were expected to surge in the September – October’s period of festive season, but now as both interest rates and fuel prices have been hiked, most of the car makers are expecting the car sales to be a moderate affair this time around.

Currently about 70 percent cars sold in the Indian market are purchased through finance option. Moreover, even most of the car dealers buy the cars from OEMs through bank financing, with a general window of repaying the same in 45 days. The slowdown in sales Thus, the hike in rates proves a double dampener for the industry.