Photo Credit: The New Indian Express
India’s struggling automobile sector has finally got a reason to rev its engines. In a bold move, the Reserve Bank of India (RBI) has reduced the repo rate by 50 basis points, bringing it down to 5.5%, while also slashing the Cash Reserve Ratio (CRR) by 100 basis points. This move, the sharpest since the COVID-era cuts, is aimed at tackling sluggish consumer demand and boosting credit flow across sectors—especially the interest-sensitive auto industry.
The timing couldn’t be better. After months of muted retail sales, rising vehicle costs, and high interest rates, the auto sector has been grappling with weak buyer sentiment, especially in the entry-level and rural markets.
Auto Industry Cheers Policy Shift
Top auto manufacturers and industry leaders have lauded the RBI’s decision. Shailesh Chandra, President of SIAM and Managing Director of Tata Passenger Vehicles, called the repo rate cut a “much-needed positive move” that will make auto financing cheaper and improve affordability for consumers.
Similarly, Venkatram Mamillapalle, MD of Renault India, believes the twin cuts in repo and CRR will enhance liquidity and strengthen demand recovery in the coming months. He stressed that this could be the tipping point for those sitting on the fence about big-ticket purchases like cars or SUVs.
Anish Shah, Group CEO of Mahindra & Mahindra, also highlighted how lower borrowing costs could catalyze investments and revive consumption in sectors like automobiles, housing, and MSMEs.
Will It Be Enough?
Despite this optimism, the road to recovery isn’t without speed bumps. According to FADA (Federation of Automobile Dealers Associations), passenger vehicle inventory levels remained well above comfort zones in May 2025, with average stock of 52–53 days. This indicates a backlog in retail movement and a need for faster turnaround in showroom footfall.
Additionally, concerns around supply chain disruptions, raw material imports, and global geopolitical trends may still weigh on production costs and timelines.
