Demand for Entry level Cars in India have been under pressure since more than 3 years now. The industry was kind of struggling with its own issues like chip shortage, commodity Inflation and more, but with now Interest rates moving upwards can overshadow the one already under pressure.
Maruti Suzuki-the behemoth when it comes to India passenger vehicle space believes that entry level car sales can continue to be under pressure with interest rates going up. Higher interest rate means higher EMI and it also shrunks the of purchasing power of customers and dents the sentiment as well. Entry level car segment has more of a threat as Shashank Srivastava of Maruti Suzuki highlights that over 80% of cars here are purchased through various financing options.
Reserve Bank of India raised Policy rate by 50 bps after hiking 40 bps back in month of May. The increase this time was on expected lines but when it comes to projection, they forecast real GDP for 2022-23(Apr-Mar) to grow at 7.2%. Inflation is now projected at 6.7% in 2022-23, with Apr-Jun at 7.5%, Jul-Sep at 7.4%, Oct-Dec at 6.2%, and Jan-Mar at 5.8%.
But current the demand for Autos are holding up quite well says Shashank Srivastava and he also adds that he is hopeful of a good year for the industry. On GDP Forecast at 7.2% he says that this is good for industry as one can see this as growth number for Auto Industry which has a good correlation with growth in economy. And he was also convinced with the Inflation number projections where Q4 number were much lower than estimated for Q1 and Q2 which means some cool off can give some respite from elevated cost level of input material. Commenting on overall policy he finds it a balanced RBI Policy having pragmatic measures.
