The Hindu Business Line : Divergent views on interest rate impact on auto sales

Chennai, July 19 In a panel discussion organised here by TV channel CNBC AWAAZ, experts from the automobile industry differed over the impact of rising interest rates on automobile sales.

Dr Pawan Goenka, President-Automotive, Mahindra & Mahindra Ltd, and Mr Ravi Narayanan, Head, ICICI Bank-Car Loans, felt that a rise in interest rates would only cause a temporary slowdown because of postponement of purchase decision. Dr Goenka drew a parallel with the temporary slowdown soon after a hike in fuel prices and said that higher interest rates may cause buyers of vehicles to stay away from the market for a while, but they would come back.

Mr Jagdish Khattar, Managing Director, Maruti Udyog, differed. He said that a potential purchaser of small cars might reconsider his decision because interest rate hike would burden him also in terms of other loans such as mortgages and consumer loans.

Safety, manpower

The panel discussion was part of the TV channel’s Auto Evolution Series. Other than the topic of interest rates, there seemed to be a unanimity of views on many other issues discussed such as safety and manpower shortage.

The panellists said that while vehicle manufacturers were not averse to spending on improving safety features in vehicles, the features themselves would not solve the problem. Dr Goenka noted that the value lost due to accidents was about Rs 55,000 crore each year and about 70 per cent of fatal accidents involved two-wheelers.

The experts noted that the issue of safety was one that essentially involved mindset and better enforcement. They noted that seat belts and airbags were okay, but only if it was ensured that the basic features of a vehicle — such as brakes and head lamps — worked, and that the drivers were trained, a lot of accidents could be avoided.

The experts also stressed that the problem of manpower crunch was hurting. Mr Khattar said earlier attrition was seen only in the upper levels of employment, but Maruti was beginning to see high attrition rates even at shop-floor levels.

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