NEW DELHI: After a prolonged slowdown and the COVID-19 pandemic lockdown hit, the Auto Sector is pinning hopes on lucrative retail financing options and the liquidity improvement measures announced by the Reserve Bank of India (RBI) to generate demand in the market.
India's largest carmaker Maruti Suzuki (MSIL) in partnership with Cholamandalam Investment & Finance Company Limited (CIFCL), on Friday rolled out 'Buy Now Pay Later Offer' in which a customer can purchase a car now and start making payment after two months.
A two-month deferment of EMI will bring advantage to car customers who currently face a monetary crunch amidst the COVID-19 pandemic, the carmaker said. The offer is available on select Maruti Suzuki models and will be applicable on loan disbursement till June 30, 2020.
Shashank Srivastava, Executive Director (Marketing & Sales), Maruti Suzuki said, "It is aimed to offer comfort to buyers who may have faced liquidity crunch during the COVID-19 lockdown. I am sure that the 'Buy-Now-Pay-Later Offer' will encourage customers towards car purchase without putting immediate extra pressure on their pockets.
Not only MSIL, but other carmakers such as Hyundai (HMIL) and Mahindra & Mahindra have also come out with easy retail finance options to attract buyers at a time when market sentiment has hit an all-time low. The nationwide lockdown had reduced domestic car sales to zero in April, and going ahead, pay cuts, high employment rate and poor GDP forecast is expected to impact consumption and delay the recovery of the sector.
The Reserve Bank of India on Friday came up with a new set of measures to improve liquidity in the market by reducing repo rate and reserve repo rate and extending loan moratoriums by three months. The industry wants this benefit to reach final consumers.
Rajan Wadhera, President, SIAM welcomed the 0.40% (40 bps) reduction in repo rate. He stated that "40 bps reduction in repo rate, which takes the repo rate to 4%, is a very welcome step by RBI to support a reduction in the cost of borrowing for traders and consumers and hence would positively impact consumer demand. We are hopeful that banks will pass on the benefit and support demand creation for discretionary products, like automobiles."
SIAM had recently estimated that the automobile sector could have a de-growth in the range of (-22)% to (-35)% in various industry segments, for the year FY21, if the overall Indian GDP growth is at 0-1 per cent for FY 21.
The RBI on Friday said India's GDP growth will be in negative territory in 2020-21 as the coronavirus outbreak has disrupted economic activities.
Raghupati Singhania, Chairman & Managing Director, JK Tyre and Industries, also welcomed the RBI's measures but said that auto sector needs to be given a considerable boost through the reduction of GST Rates for a period of three years and introducing the long-pending scrappage policy of old vehicles.
He added, "Special efforts should be made to ensure that adequate financing is made available to potential customers for automobiles both commercial vehicles and passenger vehicles, through the NBFC route... Such measures can help revive demand and put the economy on track."