Auto Loan Interest Rates Hike: Recently, several major banking institutions in India have made a hike in auto loan interest. These banks include the State Bank Of India and Union Bank of India. The recent hike in auto loans seems to be driven by rising borrowing costs that banks incur themselves. The increase in auto loan interest rates can badly impact the industry. Specifically, it will make it costlier for customers to purchase vehicles which can result in a decreased demand for new cars. The recent development will impact customers and the industry in several ways, Check some of them below.
Decreased Demand
Higher interest rates on auto loans can badly impact the auto industry by creating a significant dip in the demand for vehicles. Customers with budget constraints will find it difficult to buy a new vehicle due to increased monthly EMIs.
Shift to Less Expensive Options
It is also expected that consumers might adjust their buying habits by opting for used cars or even cheaper, fuel-efficient vehicles to cope with the rising costs. This could impact sales of high-end or luxury cars.
Reduced Profit for Dealerships
Lowered demand and competition for sales might force dealerships to offer higher discounts and incentives to attract buyers. This can decrease their profit margins by impacting overall revenue and potentially leading to job cuts.
Slower Growth
The decreased sales rate can result in unsold vehicles standing in dealership lots for longer periods. This ties up capital and puts increased pressure on dealerships to manage storage and financing costs.
Impact on Related Industries
The ripple effect of a struggling auto industry can be felt in supporting sectors like auto parts manufacturing, logistics and car maintenance services. Slower production and demand could lead to reduced jobs and revenue in these sectors too.
Keep watching our YouTube Channel ‘DNP INDIA’. Also, please subscribe and follow us on FACEBOOK, INSTAGRAM, and TWITTER
