The Hindu Business Line : Auto cos see no major boost to demand

New Delhi, Dec. 6 Automobile companies have stated that the repo rate cut announced by the Reserve Bank of India on Saturday which is likely to lower interest rates on vehicle loans, would not boost demand.

According to manufacturers, unless banks and non-banking finance companies begin to finance vehicles adequately, there would be limited impact of reduced interest rates.

Contrary to commercial vehicles whose sales have plunged due to a slowdown in the economy, industry players have said that in the case of cars, it is mainly due to restrained financing from the banks.

“With a 100 basis point cut in repo and reverse repo rates, interest rates should go down further.

“Moreover, petrol and diesel prices have also been reduced. So overall it should stimulate demand,” said Mr Ajay Seth, Chief Operating Officer, Maruti Suzuki India Ltd.

“It depends on how banks pass on the benefit to customers. Firstly, banks must reduce interest rates and they should lend money for buying vehicles. Unless banks lend, the situation would not change,” said Mr Rajeev Kapur Fiat India Chief Executive Officer.

Lukewarm response

Commercial vehicle companies which have been the worst hit since the slowdown also responded in a lukewarm manner.

“Non-banking finance companies should get access to liquidity to finance vehicles. Till then there would be no major impact of the repo rate cut,” said Mr Prakash Telang, Executive Director, Commercial Vehicles, Tata Motors.

A top official with Eicher Motors was also of the same opinion.

“The cut in repo rate is a good signal that there would be increased liquidity in the system. But banks are very cautious in lending.

“In case if there is more pressure on banks to infuse liquidity in the system, we can expect some action,” said Mr Vinod Aggarwal, Chief Financial Officer, Eicher.

More Stories on : Outlook | Consumer Finance | CRR & Bank Rates

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
New tube lights from Surya Roshni

M&M opts for partial closure due to demand slowdown

Foreign convertible bonds buyback with rupee resources allowed

Apollo declares lockout in Kalamassery unit

Allergan looks to launch wrinkle smoothner in ’09

FACT devises new system to produce major fertiliser

GVK Power set to acquire two power projects

Auto cos see no major boost to demand