Auto Inc reacts to lowered RBI repo rates: Will car loans become more affordable? – news

The common consensus in the automotive industry is that the latest repo rate cut announced by RBI will improve cash liquidity and lower borrowing costs for both consumers and businesses.

The Reserve Bank of India (RBI) on 6 June cut the repo rate ( the interest at which the central bank lends to commercial banks) by 50 basis points (bps) to 5.5%, which has given much needed relief to home, car, and other consumer loan borrowers. Prior to this, the RBI had slashed the key interest rate in February and April earlier this year. 

Cumulatively, the repo rate has come down by 100 bps this year, which helped banks to pass on the benefits to loan consumers. This will eventually lead to lower interest rates on car and two-wheeler loans in the coming months which means lower EMIs for buyers. The latest development has generated mostly positive responses from all corners. Here’s a look at how the auto industry is reacting to RBI’s rate cut.

ACMA: Rate cut to ease Cash Reserve Ratio

“The Automotive Component Manufacturers Association of India (ACMA) welcomes the Reserve Bank of India’s decision to reduce the repo rate by 50 basis points and to ease the Cash Reserve Ratio. These measures, especially in the backdrop of persistent global headwinds, are a timely and proactive step toward stimulating domestic demand and supporting industrial growth.

The reduction in interest rates is expected to translate into lower borrowing costs for both consumers and businesses, thereby providing a much-needed boost to the automotive sector, which has been navigating a complex macroeconomic environment. The infusion of liquidity through the CRR cut will further ease working capital pressures, particularly for MSMEs that form the backbone of the auto component industry.

We remain optimistic that these measures will support sustained growth, enhance consumer sentiment, and help India’s auto component manufacturing sector retain its competitiveness in the global market.,” said, Shradha Suri Marwah, President, ACMA.

Renault: Will improve access to affordable vehicle financing

“Combined with a significant 100 bps reduction in the Cash Reserve Ratio (CRR), which releases Rs 2.5 lakh crore into the banking system, this policy is expected to strengthen liquidity and accelerate the transmission of lower interest rates to consumers, which will spur demand in the economy. For the automotive sector, this translates directly into improved access to affordable vehicle financing, especially in the entry and mid-level segments.

The reduction in CPI inflation forecast to 3.7% for FY26 will likely increase real disposable income, supporting consumer sentiment. With private consumption already on a healthy trajectory and the festive season on the horizon, we expect this policy environment to drive demand further. Moreover, robust gross FDI despite global headwinds reaffirms India’s attractiveness as a long-term investment destination.

The RBI’s proactive measures are poised to spur automotive retail, enhance customer affordability, and strengthen the economic cycle. We are optimistic that FY2025-26 will see an upward growth trajectory for the auto industry, powered by favorable macroeconomic indicators, strong fundamentals, and evolving consumer confidence,” said Venkatram Mamillapalle, Country CEO & Managing Director, Renault India.

Hyundai RBI move to boost liquidity

“We welcome RBI’s decision to reduce the repo rate by 50 basis points. Along with reduction in CRR, today’s RBI move will boost liquidity , reduce customer monthly instalments , support consumption and further accelerate economic recovery,” said Tarun Garg, Whole-Time Director and COO, Hyundai Motor India Limited.

Mahindra: Repo rate cut to ease borrowing costs

“We welcome the Reserve Bank of India’s decision to reduce policy rates at a time when the Indian economy is poised for its next phase of growth. This move demonstrates the RBI’s confidence in the macroeconomic fundamentals and its proactive approach to supporting sustainable expansion. 

The rate cut will serve as a positive catalyst for consumption and investment, particularly in interest-sensitive sectors such as automobiles, housing, and MSMEs. It will also ease borrowing costs, improve liquidity, and further strengthen the momentum behind India’s infrastructure and manufacturing push,” said Anish Shah, Group CEO & MD, Mahindra Group.

Hinduja Leyland: Rate cut will drive in demand for CVs

The repo rate cut comes at a critical juncture for the vehicle finance industry. After a cautious few quarters, we are witnessing a steady revival in demand for both new and used commercial vehicles—especially from small fleet operators and rural entrepreneurs. The improved liquidity and lower cost of funds will help us extend more competitive financing, particularly to customers in the self-employed and informal segments. 

We also expect improved freight movement and infrastructure activity to drive demand in both heavy and light commercial vehicle categories. Our focus will be on expanding our reach in high-potential geographies while ensuring disciplined credit practices,” said Sachin Pillai, MD&CEO – Hinduja Leyland Finance Ltd.

*This story will be updated with comments from other OEMs*

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This article was first uploaded on June six, twenty twenty-five, at eleven minutes past nine in the night.

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