The RBI’s 50-basis-point repo rate cut is expected to revive demand in the automobile sector, which has been grappling with sluggish buyer interest. Industry experts believe the rate reduction, coupled with a 100-basis-point cut in the Cash Reserve Ratio (CRR), will improve financing accessibility and lower borrowing costs, boosting consumer sentiment.
Shailesh Chandra, President, SIAM and Managing Director of Tata Passenger Vehicles Ltd & Tata Passenger Electric Mobility, said the reduction in the repo rate would have a positive impact on the auto sector since it would lead to increased accessibility to finance at reduced costs, thereby creating a positive sentiment amongst consumers in the market.
The move comes as automakers face weakening sales due to steep price hikes, particularly in the passenger vehicle segment, which have pushed cars out of reach for many buyers.
Venkatram Mamillapalle, Country CEO & Managing Director, Renault India, said that combined with a significant 100 bps reduction in the Cash Reserve Ratio (CRR), which releases Rs 2.5 lakh crore into the banking system, this policy is expected to strengthen liquidity and accelerate the transmission of lower interest rates to consumers, which will spur demand in the economy. For the automotive sector, this translates directly into improved access to affordable vehicle financing, especially in the entry and mid-level segments.
He added that the reduction in the CPI inflation forecast to 3.7% for FY26 will likely increase real disposable income, supporting consumer sentiment. “With private consumption already on a healthy trajectory and the festive season on the horizon, we expect this policy environment to drive demand further…The RBI’s proactive measures are poised to spur automotive retail, enhance customer affordability, and strengthen the economic cycle. We are optimistic that FY2025-26 will see an upward growth trajectory for the auto industry, powered by favorable macroeconomic indicators, strong fundamentals, and evolving consumer confidence,” stated Mamillapalle.
Anish Shah, Group CEO & MD, Mahindra Group, said that the rate cut will serve as a positive catalyst for consumption and investment, particularly in interest-sensitive sectors such as automobiles, housing, and MSMEs. “It will also ease borrowing costs, improve liquidity, and further strengthen the momentum behind India’s infrastructure and manufacturing push,” stated Shah.
