Car panels are welded using a robotic machine at Manesar’s Marti Suzuki manufacturing plant | Photo credit: Anushree Fadnavis
The automotive sector received a major boost on Friday by a reduction in the Reserve Bank of India (RBI) 50 base repoint rate. The move is expected to have a positive impact on industries currently tackling the rare earth mineral crisis.
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However, veterans in the industry have emphasized that the complete impact is on how quickly banks and non-bank financial companies (NBFCs) pass these low charges, especially given the three policy reviews that involve cumulative 1% points reductions.
CS Vigneshwar, president of the Automotive Dealer Federation Association (FADA), BusinessLine: “This will certainly help… it will take several weeks or a month for this to send on the ground, as it will take time for the banks and NBFCs to redo it and send it back to us. So, in the next quarter, a lower rate positive effect will kick in, especially towards the lower end of the car segment.”
Maruti Suzuki India (MSIL), the country’s largest passenger vehicle manufacturer, noted that while some banks have already communicated previous interest rate cuts, some major banks have not yet done so. Partho Banerjee, Senior Executive Officer – Marketing and Sales, MSIL has expressed optimism. [on the repo rate cut on Friday’] And if the bank starts sending the earliest, it’s actually a positive thing [for the industry]. “He explained that some banks need more time to adapt to existing high interest rate cycles of funds.
Shrada Sri Malwa, president of the Indian Auto Parts Manufacturers Association (ACMA), welcomed the RBI decision as “a timely and positive step to stimulate domestic demand and support industry growth, particularly against the backdrop of a lasting global reversal.” She added that interest rate cuts are expected to “convert into reducing borrowing costs for both consumers and businesses, thereby providing much needed boost to the automotive sector.”
Anish Shah, group CEO and MD of Mahindra Group, has confirmed it will serve as a positive catalyst for consumption and investment, especially for interest-sensitive sectors such as automobiles, housing and MSMEs.
Released on June 6, 2025
