Pune automobile dealers fear dull festive season

A section of automobile dealers of the city are apprehensive about the forthcoming festive season as it could mean dull business for them.

Reason: the recent increase in fuel prices and the impending hike in interest rates on home, automobile and personal loans by banks following the increase in repo rates by the Reserve Bank of India (RBI).

Repo rate is the rate at which banks borrow from the RBI. During Dassera and Diwali, the sale of two- and four-wheelers picks up drastically as it is considered an auspicious time to buy vehicles.
Vishal Agarwal, director of Wonder Cars, which sells cars from the Maruti stable, admitted that once the banks formally announce the increase in interest rates, sale in the entry and middle-level segments would be affected.

“Our primary customers are the salaried class. And they might resist buying new vehicles due to increase in petrol prices and interest rates at regular intervals,” Agarwal added.

Kaushik Kothari, director of Crystal Honda, predicted that there could be a slump in the sale of vehicles once the banks announce hike in interest rates.

“Once the EMI (equated monthly installments) increases, the market could become dull,” he said.

But he adds, “We have noticed that this downturn in sales is a temporary phase. It takes time to sink in that one has to pay higher EMI to purchase a vehicle. Once that realisation comes, sales would surely pick up.”

According to Kothari, those who already have existing loans would be the hardest hit if they are planning to buy a new vehicle. Not only the middle class, but the rich segment too will feel the pinch while buying four-wheelers.

According to some car dealers in the city, buyers might rush their decision to buy cars. “The banks are yet to announce the hike in interest rates on loans. Those buyers who have made up their minds to buy cars during the festival would purchase vehicles even before that,” said Kothari.

However, those involved in the sale of two-wheelers are of the view that since the amount of loan involved in buying two-wheelers is small compared to cars, any hike in the interest rates by banks would not affect their sales during the festival.

Sagar Pashankar, MD of Pashankar Auto, which sells Honda two-wheelers, argued that the increase in EMI would be marginal. “People would not mind paying a bit more during the festival to buy a brand new two-wheeler,” he added.