Higher prices, costlier loans may hit car sales this festive season
MUMBAI: Rising interest rates and higher car prices could hit consumer sentiment this festival season, even as demand is likely to be subdued in Kerala, where the worst floods in more than a century have left more than 380 people dead, according to dealers and auto company executives.
Barring July, car sales have grown at a fast pace since January on the back of a recovery in rural demand and a slew of product launches and upgrades. Car sales in India are considered as factory dispatches to dealerships. Auto makers may have to trim dealer inventory if retail demand fails to keep pace.
The festival season, which started with Onam this month and will end with Diwali in November, is crucial for companies as consumers traditionally consider it auspicious for big-ticket purchases such as cars.
Factors such as two straight repo rate hikes in June and August and nine straight months of retail inflation above the central bank’s medium-term target of 4% are likely to affect consumer sentiment, said executives at dealerships.
“Enquiries have reduced by about 20% compared to the same period last year as consumers are concerned about uncertain fuel and food prices. We are expecting a subdued festive season despite new launches,” said a Honda Cars India Ltd dealer in New Delhi, adding that about 40% of car buyers take loans.
A Maruti Nexa dealership executive in western Mumbai concurred. “Enquiries and footfalls are marginally lower than last year, though we have high expectations owing to new products and festive schemes. There is a delay in intent to purchase because even car prices have risen,” the executive said.
The Reserve Bank of India’s (RBI) June consumer confidence survey of over 5,000 individuals in six metropolitan cities found that 83% of respondents believe prices would rise 12 months from now, with only 48.2% of respondents expecting general economic conditions to improve a year hence. As many as 27.7% expect economic conditions to worsen.