Car News in India

Auto sales, a key barometer of economic buoyancy, may slow down this financial year amid spiraling costs and high interest rates, fear car makers.

Auto companies have dramatically lowered their growth forecast to 2-4 percent this year from 10-12 percent earlier as sales dropped for the third straight month.

In September, sales slipped 1.8 percent to 165,925 cars, according to data released by ‘Society of Indian Automobile Manufacturers’ (SIAM) on Monday. Car sales had actually jumped 30 percent in the fiscal year 2010-11 ended March.

The newly elected president of SIAM and chairman Eicher Motors, S Sandilya, said that high interest rates and rising fuel prices are affecting demand. “We do expect some moderation in growth but the festive period could bring in some delayed cheer,” he said.

India’s central bank has raised interest rates 12 times since March last year in an attempt to tame a stubbornly high inflation rate. Carmakers expect sales to rise at their slowest pace in three years with many customers choosing to put off purchases in Asia's third-largest car market.

What has made matters worse is the strife at the Manesar plant of Maruti Suzuki, a company that sells every second car in India. Maruti’s sales plunged 17 percent to 78,816 cars in September over the same month last year. A senior executive of Maruti Suzuki said diesel cars and new launches usually fire up the Indian market.

“The dozen new cars that had hit the domestic market in the past 50 days have helped maintain some momentum in an otherwise declining market,” he said.

“The market will behave differently for various products. While few cars would be sold off the shelf, there would be some models that could face stagnating demand, resulting in single digit growth for the entire car industry this fiscal,” Sandilya said.

SIAM pegged overall growth for the automobile industry, including commercial vehicles, two - and three-wheelers, for the full year at 11 percent-14 percent, slightly up from 11-13 percent projected in July. This projection of surprise double-digit growth is primarily based on the high-volume two-wheeler segment, which grew 24 percent to 12.33 lakh units last month.