Inflation always has a negative effect on the car market. The development of the car market comes to a standstill when there is inflation in the market. The effect of inflation on car market is not at all encouraging and it badly affects every sector, which is associated with vehicle production and manufacturing. The hike in the rate of steel and fuel has resulted in a slower rate of development of the Indian automotive industry. One of the major effects of inflation is that the manufacturing of Indian cars has been hindered to a significant extent.

It has also been witnessed that major Indian vehicle manufacturers such as Tata Motors, Mahindra and Mahindra, Hyundai, Maruti Suzuki, and Honda Siel Motors are attempting their best to improve their manufacturing and sales of the vehicles amidst the situation where the stock market is showing a sluggish growth. It has also been seen because of inflation that sales of particular vehicles are being stimulated by the discounted rates that the car manufacturers are providing to the customers. Some of the vehicle makers have even resorted to offering exchange offers to the customers and some have launched competitive car financing rates. The effect of inflation has resulted in the hike of vehicle prices to the extent of 3%-4%, which sequentially is adequate for the necessity of meeting the hike of rates of raw materials for making an automobile.

The effect of inflation on car market has not only badly impacted the manufacturing and sales of Indian vehicles but also the vehicle dealers, employees, and vehicle financers. Surveys and studies have resulted in the conclusion that the vehicle market and the vehicle manufacturing industry in India experienced 8-9% slump due to inflation.

The effect of inflation on vehicle manufacturers have consequently affected the vehicle dealers in a manner where they are being forced to thrust the sales curve upward and maintain a high volume of profit. In this arrangement, the vehicle financers are compelled by both vehicle dealers and vehicle manufacturers to offer the customers a 100% financial assistance by lowering the interest rate of the loan.

On the whole, it has been observed that the car market in India (both passenger car market and commercial vehicles market) has witnessed a slump with the inflation badly hitting nearly every sector to which the Indian automobile market is closely associated.

 

Inflation is really a major issue nowadays where almost all the country are suffering from such kind of situations. It doesn't make any change to rich people but it has great effect on lower and upper middle class people. They can not afford car in such Inflation period.