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The domestic auto industry is entering the festive season

ICICIdirect Research 08 Oct 2026 DISCLAIMER

News: The domestic auto industry is entering the festive season with a two-sided affordability challenge. On one front, several OEMs have announced price hikes amid higher commodity/input costs. While on the other hand, the pressure is now compounded by the RBI's 25-bps repo-rate hike to 5.50% and shift to a 'calibrated tightening' stance. Higher funding costs could gradually translate into higher auto-loan rates and EMIs.

View: The immediate impact on volumes may remain limited as the incremental EMI burden from a 25-bps hike is not large enough to derail a purchase decision by itself. However, the combination of vehicle price inflation + higher financing costs + still-elevated commodity prices (potential rise in fuel prices also cannot be ruled out) could become a more meaningful headwind if the rate cycle extends. This assumes significance as ~70% of vehicle purchases are financed in India. Entry level 2-W and PV could pose a volume growth challenger while premium offering in the 2-W & PV could still be resilient. This is marginally negative for Maruti Suzuki while neutral for M&M, Hyundai Motors, Tata Motors. For CVs, the equation will remain more closely linked to freight rates and replacement demand which is currently depicting positive green shoots. Sentimentally this is negative for the auto stocks.

Impact: Negative

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