Rising costs of steel, fuel have already been wreaking havoc in the automobile industry but hiked interest costs have added the final blow to their profitability by steering away potential consumers due to huge monthly EMIs.

But automobile giant Hero Honda has managed to keep its head above water in the two wheeler space by holding on to volumes and to some extent its margins too.

But it isn't going to get any easier as interest rates also escalate and banks refuse buyers the finance option.

While commenting on how the company plans to battle with slump in two-wheeler sales, Anil Dua, Senior VP-Marketing of Hero Honda, said: “We are getting into tie ups with local banks and regional rural banks or RRBs as finance is tonic for this business."

Besides assessing its own entry into two wheeler finance, Hero Honda is actively seeking tie ups with smaller banks and especially RRB's especially crucial since bike makers are also trying to increase sales in the rural markets.

Hero Honda managed to stay ahead of Bajaj and TVS not just in volumes terms but also margins, so while the picture may look bleak going ahead.

Hero Honda will benefit by shifting manufacturing of some entry segment models to it's new plant in Haridwar where the 5 year income tax holiday and 10 year excise duty benefit from the Uttarakhand government will help boost it's margins post second quarter.