The automotive sector received a significant boost on Friday with the Reserve Bank of India’s (RBI) 50-basis-point repo rate cut. This move is expected to make loans cheaper, positively impacting the industry, which is currently grappling with a rare earth mineral crisis. Shailesh Chandra, President, Society of Indian Automobile Manufacturers (SIAM), stated: “Such a reduction in repo rates 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.” However, industry veterans emphasised that the full impact hinges on how quickly banks and non-banking financial companies (NBFCs) pass on these lower rates, especially given that there have been three policy reviews with a cumulative one percentage point cut. CS Vigneshwar, President, Federation of Automobile Dealers Associations (FADA), told businessline: “This would certainly help... it just takes a few weeks or a month for this to transmit on the ground because the banks and the NBFCs take time for them to rework and send that back to us. So, hopefully, in the next quarter we will see the positive effects of the lower rates kicking in, especially towards the lower-end of the cars segment.” Maruti Suzuki India (MSIL), the country’s largest passenger vehicle maker, noted that while some banks have already transmitted previous rate cuts, a few leading banks are yet to do so. Partho Banerjee, Senior Executive Officer - Marketing and Sales, MSIL, expressed optimism: “Several banks have done, but there are a few banks who still have to do. But, this is great news [on the repo rate cut on Friday’] and if the banks start the transmit at the earliest, it will be a positive thing actually [for the industry].” He explained that some banks require more time to adjust to the existing higher interest rate cycles on their funds. Shradha Suri Marwah, President, Automotive Component Manufacturers Association of India (ACMA), hailed the RBI’s decision as a “timely and proactive step toward stimulating domestic demand and supporting industrial growth, especially in the backdrop of persistent global headwinds”. She added that the reduced interest rates are expected to “translate into lower borrowing costs for both consumers and businesses, thereby providing a much-needed boost to the automotive sector.” Anish Shah, Group CEO and MD, Mahindra Group, affirmed that the rate cut will act as a positive catalyst for consumption and investment, particularly in interest-sensitive sectors such as automobiles, housing, and MSMEs. Published on June 6, 2025