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Indian auto industry banks on RBI interest cut for sales

While RBI interest cut may not be all that was expected, interest rate reduction certainly brings some respite to Indian auto industry. Most automakers have announced a price hike beginning 2015 keeping in mind input costs and economic conditions. Furthermore, the Indian government did not extend the tax concession that was levied for almost all of 2014. With buyer sentiment contracting, new interest rate relief will help fuel some buying activity.

Indian auto industry looks to January 2015 RBI interest rate cut

Parthasarathy, Chief Financial Officer, Group CIO, EVP – Group M&A and Member of Group Executive Board, Mahindra is happy with the surprise announcement and expects some economic activity. While the rate reduction could have been deeper, it is the direction of interest rates that RBI has signalled that is meaningful. RBI’s reading of inflation and inflation expectations further boosts positive sentiments. Banks and credit providers will now follow RBI’s cue and reduce interest rates so investment and consumer demand improves.

Owing to imminent excise duty cut rollback in January, December 2014 sales were active. Indian auto industry produced 1,850,616 vehicles (passenger, commercial, three wheelers and two wheelers) over 1,741,237 in December 2013, equating to 6.28 percent growth.

Indian auto industry passenger vehicle sales growth was at 3.67 percent in April-December 2014 over the same nine months in 2013. Passenger cars and utility vehicles grew by 4.99 percent and 5.49 percent respectively. Van sales declined by 12.63 percent in April-December 2014.

Indian auto industry commercial vehicles were reported at 5.65 percent sales decline in April-December 2014. Medium & Heavy Commercial Vehicles (M&HCVs) grew by 10.33 percent. Light Commercial Vehicles report 12.77 percent sales decline.

Three Wheeler sales grew by 14.10 percent in April-December 2014. Passenger Carriers and Goods Carriers grew by 15.47 percent and 8.17 percent.

Two Wheelers sales reported 11.04 percent growth in April-December 2014 over April-December 2013. Scooters, Motorcycles and Mopeds grew by 27.71 percent, 5.54 percent and 9.88 percent, respectively

In April-December 2014, overall Indian auto industry exports grew by 20.75 percent. Passenger Vehicles, Commercial Vehicles, Three Wheelers and Two Wheelers grew by 6.21 percent, 14.58 percent, 20.56 percent and 25.26 percent, respectively.

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