Auto industry welcomes RBI's rate cut decision, believes it will add to consumer affordability

The Automobile industry has supported the Reserve Bank of India's rate-cut decision, and they believe that this decision will add positive sentiment among consumers in the market.

On Friday, the RBI reduced the repo rate by 50 basis points to 5.5 per cent. The central bank also cut the Cash Reserve Ratio (CRR) by 100 basis points to 3 per cent. The CRR cut will be implemented starting September 6, in four tranches of 25 basis points each in four fortnights. The CRR cut alone will infuse a liquidity of ₹2.5 lakh crore in the Indian banking system.

Shailesh Chandra, President, SIAM and Managing Director of Tata Passenger Vehicles Ltd & Tata Passenger Electric Mobility Ltd., welcomed the RBI's decision of a 50 bps repo rate cut. He said, "Such a reduction in repo rates would have a positive impact on the Auto sector since it would lead to increased accessibility to finance at reduced costs, thereby creating a positive sentiment amongst the consumers in the market."

Anish Shah, Group CEO & MD, Mahindra Group, supported the decision of the RBI to reduce rates at a time when the Indian economy is poised for its next phase of growth.

"This move demonstrates the RBI's confidence in the macroeconomic fundamentals and its proactive approach to supporting sustainable expansion. The rate cut will serve as a positive catalyst for consumption and investment, particularly in interest-sensitive sectors such as automobiles, housing, and MSMEs. It will also ease borrowing costs, improve liquidity, and further strengthen the momentum behind India's infrastructure and manufacturing push," Anish Shah said

Additionally, Venkatram Mamillapalle, Country CEO & Managing Director, Renault India, believes that this rate cut is a timely move and says that this move will add to customer affordability.

"This policy is expected to strengthen liquidity and accelerate the transmission of lower interest rates to consumers, which will spur demand in the economy. For the automotive sector, this translates directly into improved access to affordable vehicle financing, especially in the entry and mid-level segments," he said.

Furthermore, he mentions that he is optimistic about positive growth in the auto industry for FY2025- 26, powered by favourable macroeconomic indicators, strong fundamentals, and evolving consumer confidence. "The RBI's proactive measures are poised to spur automotive retail, enhance customer affordability, and strengthen the economic cycle," he further added.

Federation of Automobile Dealers Associations (FADA) vehicle retail sales data for May, released on Friday, show a modest rise of 5 per cent compared to the same month last year.

FADA also said that global supply-chain headwinds--from rare-earth constraints in EV components to ongoing geopolitical tensions--may keep urban consumer sentiment in check. RBI's rate cut and CRR cut will be a major boost for the Industry.

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