Rate hike is shocking, says auto industry

The auto industry expressed shock at the Reserve Bank's decision to hike key policy rate by 25 basis points today, saying the move will further dampen the already cringing demand and hit sales this festive season.

"The market has already slowed down. This latest hike will further dampen the auto sector. It will dampen demand during the festive season. It was never expected. The RBI should have given a break, at least this time," General Motors India Vice-President P Balendran told PTI.

RBI raised its lending rate (repo) by 25 bps points to 8.25% - 12th hike since March last year, to batten down inflation which was 9.78% in August.

"Usually, every year we target around 20% jump in sales during the festive season, but this year we expected only 5% spike due to repeated interest rate hikes. But now it will be difficult to achieve even this 5% growth in sales," Balendran added.

Asked whether the company will increase car prices, he said, "we have not decided anything on it."

Fiat India also sees a significant impact on the sector following the RBI action.

"The industry is already under tremendous pressure and this fresh step by the central bank will further aggravate the situation. We never expected this. It's going to further dampen the festival sales," Fiat India President and Chief Executive Rajeev Kapoor said.

"The RBI step will hurt the overall auto industry," he said, adding that the company has not decided on price hikes.