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Increase in repo rate to ‘apply certain amount of brakes’ on auto industry's growth: FADA

05 May 2022 Evaluate

Expressing concerns over growth of Indian automobile industry, automobile dealers' body -- Federation of Automobile Dealers Associations (FADA) has said the increase in repo rate will ‘apply certain amount of brakes’ on the industry's growth, especially the two-wheeler segment which is already reeling under a severe slowdown. Home, auto and other loan EMIs are likely to go up after the Reserve Bank of India (RBI) hiked its key interest rate by 40 bps in an unexpected move on May 04 to tame the rising inflation that has remained stubbornly above target in the recent months.

FADA) President Vinkesh Gulati said ‘The RBI's move of increasing repo rate by 40 bps has clearly taken everyone off guard. This move will curb excess liquidity in the system and will make auto loans expensive’. He added the passenger vehicle segment may be able to absorb this shock due to long waiting periods. However, the two-wheeler segment, which has been a non-performer due to an underperforming rural market, vehicle price hikes and high fuel costs, will not be able to take one more blow of high vehicle loan costs.

He also said ‘Certainly, this move will apply certain amount of brakes on auto retail and dampen the sentiments further’. As per the FADA, in March, two-wheeler sales declined by 4 per cent to 11,57,681 units as compared with 12,06,191 units in the year-ago period. FADA represents over 15,000 automobile dealers having 26,500 dealerships across the country.

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