FADA cautiously optimistic on near term outlook for auto sales

The hike in vehicle prices by the manufacturers, the fallout of the 35 basis points (bps) increase in the repo rate by the Reserve Bank of India (RBI), may dent the confidence of two-wheeler and entry level car buyers, said the Federation of Automobile Dealers Associations (FADA). According to FADA, post 35 bps repo rate (the rate at which the RBI lends to commercial banks) hike, the total repo rate is now 6.25 per cent, the highest since February 2019. Further hikes in the future are also hinted at. “This will further lead to a higher cost of borrowing apart from the price hikes done by OEMs (original equipment manufacturers) and may dent the consumer confidence specially in 2W (two-wheeler) and entry level PV (passenger vehicle) segment,” FADA said on Friday. Along with this, the China lockdown may play its part in slowing the supply of semiconductors. If this happens, it may act as a speed-breaker and add to the supply-demand mis-match which has been improving since the last few months, FADA added. Due to the above reasons, FADA remains cautiously optimistic in the near term. On the vehicle sales numbers last month, FADA President Manish Raj Singhania said: “November 2022 has clocked the highest retails in the history of Indian Automobile Industry with March’20 as an exception when retails were higher due to BS-4 to BS-6 transition.”