Rate cuts on loans help increase bookings this festive season

Saturday 12 October 2013, 12:06 PM by

It is a well known fact that Indian automobile industry is going through a low phase since past eight months. Sales have been going down with each passing month and all that companies have done is wait and hope for a change of scenario. The month of August saw a little growth in sales, however, it was largely due to statistics registered by Maruti Suzuki, which, in turn, had a loophole in it. The falling economy and value of rupee have affected the Indian car market adversely. In fact, a lot many firms have slowed down the production and reportedly, a few were also on the verge of closing down a few manufacturing facilities. Certain firms were compelled to hike prices as the imported parts had begun to take a toll on their cost levels. However, with the festive season coming along, car makers have got renewed hope and expectation levels.

The commencement of Navratri has witnessed a growth in bookings by leaps and bounds in past six days. The basic reason behind heavy bookings is the initiative taken by companies to cut down on interest rates. According to sources car makers are overjoyed with recent developments and expect even higher bookings during Dusshera, Dhanteras and Diwali. According to officials from one of the major auto makers, "Bookings in the past few days have been pretty good. We have seen increased interest from customers and walk-ins have also improved, especially in North and West India. “

As per Rakesh Srivastava, Senior Vice President (Marketing & Sales) at Hyundai Motor India, fresh bookings in months of September and October this year have been higher in number when compared to the ones of 2012. However, it is the banks that have actually breathed a new lease of life into the auto industry. On 8th October, a number of Public Sector banks including Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and IDBI Bank, declared special offers on auto loans to mark eve of the festive season, marginally reducing monthly instalment for consumers.

State Bank of India (SBI), one of the leading lenders in the business of passenger car finance, has also reduced auto loan rates by a small margin though home loan rates remain unchanged. Reports suggest that private lenders like Kotak Prime, ICICI Bank and HDFC Bank are also expected to follow suit. As of now, private banks are offering car loans in the range of 11-13 per cent on new cars whereas PSU banks are charging 10.25 to 12.5 per cent. There's a possibility of reduction of 0.2 to 0.3 per cent rates in the coming future and a declaration to this effect is expected to be taken in the coming week, according to a source close to this entire development.

Interest rates play a major role in determining supply and demand in the auto market. Previously, around 70 to 72 per cent of consumers purchased cars with loans but now only 65 per cent follow this trend due to the high EMIs. The rest of buyers prefer cash purchases over high EMIs. Auto firms have held high high expectations with recent developments and hope that the reduction in interest rates will help increase the overall interest and footfalls in showrooms. The car market has faced losses for a long time, however, the improvement in conditions has made the dealers pin all their hopes on this festive season.

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