RBI repo rate cut: Auto industry says it will create a positive sentiment across the market

Automobile industry on Friday has welcomed the Reserve Bank of India’s rate cut by 25 bps, saying the reduction in rates at this time, closely following the relaxation in income tax for individuals in the recent Budget would certainly have a positive impact on the auto sector.

“Reduction in rates at this time, closely following the relaxation in income tax for individuals in the recent budget would certainly have a positive impact on the auto sector, as it will increase accessibility by reducing the financing costs, thereby creating a positive sentiment across the market,” Shailesh Chandra, President, Society of Indian Automobile Manufacturers (SIAM) and Managing Director of Tata Passenger Vehicles and Tata Passenger Electric Mobility, said.

Constructive policy shift

Similarly, Federation of Automobile Dealers Associations (FADA) said the first reduction in five years signals a constructive policy shift that prioritises economic growth while maintaining a watchful eye on inflation.

“With auto loans set to become more affordable, we expect stronger demand in the price-sensitive two-wheeler and entry-level car segments, which have faced the brunt of steep price hikes and affordability concerns. Moreover, this cut dovetails seamlessly with the Finance Minister’s recent announcement of zero tax up to ₹12.75 lakh (for salaried), thereby enhancing consumers’ disposable income,” C S Vigneshwar, President, FADA, said.

When combined, these measures could reinvigorate segments that have been lagging, helping them catch up with the broader market, he said.

The Automotive Component Manufacturers Association of India (ACMA) also said that 25 bps reduction in the repo rate to 6.25 per cent, is a welcome move that will enhance liquidity, reduce borrowing costs, and provide a much-needed boost to the manufacturing sector.

“Easier access to finance will drive greater investments in research and development (R&D), localisation, and sustainability, ensuring that the automotive industry remains competitive and future-ready. Moreover, improved liquidity is expected to provide crucial working capital support to tier 2 and tier 3 suppliers, fostering growth across the entire automotive value chain,” Shradha Suri Marwah, President, ACMA, said.