Festive season fails to cheer auto industry as rising fuel prices, higher interest rates take toll

For the rise in the interest rate, the CRISIL research report said there has been an increase of 20-25 basis points in the interest rates for car buyers. One basis point is a hundredth of a percentage point.

Over the last three months, the demand has been extremely poor owing to 15 percent increase in fuel prices, 100 percent jump in insurance cost and 50 bps rise in interest rates, the Motilal Oswal report said.

The mandatory upfront payment of three-year premium in the first year of purchase for third party liability and the increase in personal accident cover (PAC) from Rs 2 lakh to Rs 15 lakh has led to a an increase of Rs 6,000 for an entry-level car such as the Maruti Alto, the CRISIL report found.

Between April and October, the average petrol prices surged 11.3 percent on-year, the CRISIL report cited.

The CRISIL report said the industry faced a dull season despite offering customers a shorter wait time of just a couple of weeks. During the festival season, the waiting period is between 30 and 35 days for the past couple of years as opposed to the off-season waiting period of around 40 days.

"We are trimming 200 bps from our earlier growth forecast of 9-11 percent for the passenger vehicles industry to 7-9 percent," the CRISIL report added. 

The sales were merely increased by 1.6 percent in October, for September and October combined, they de-grew by approximately two percent, the report said, adding that the fiscal-to-date (April-October) growth is just six percent.

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