High interest rate, price hikes may dent consumer confidence: FADA

NEW DELHI:   Auto dealership body Federation of Automobile Dealers Associations (FADA) on Friday said repetitive repo rate hikes by the Reserve Bank of India (RBI) will further lead to a higher cost of borrowing apart from the price hikes done by OEMs (original equipment manufacturers).

This, according to FADA, may dent consumer confidence, especially in the two-wheeler and entry-level passenger vehicle segment. The RBI on Wednesday increased the benchmark rate by 35 basis points (BPS) to 6.25%. The repo rate has now gone up 225 bps since May 2022 and this in turn has pushed housing loan rates to over 9%. While interest rates for fixed-rate loans, such as personal loans, remain the same throughout the tenure, for retail loans, including home loans and auto loans, the rates are linked to an external benchmark set by the Reserve Bank of India.

When the repo rate goes up, the repo rate linked lending rate (RLLR) of commercial banks and NBFCs banks also increases. Add to it, most automakers, including top players such as Hero MotoCorp, Maruti Suzuki and Tata Motors have increased vehicle prices by 3-4 times this calendar year. Almost all the automakers are likely to go for another round of price hike in January 2023.

Meanwhile, FADA reported that November 2022 clocked highest retail sales in the history of Indian automobile industry with March 2020 being an exception when retails were higher due to BS-4 to BS-6 transition.

Manish Raj Singhania, President of FADA, said,“The baton was passed by the positive run of festive sales to Indian wedding season (from November 14 to December 14) where nearly 32 lakh weddings will be solemnised across the country.” Nearly 23.80 lakh units were retailed in November 2022, compared to 18.93 lakh units in November 2021.