Sept Car Sales Fall 1.8% Year On Year; FY12 Forecast Slashed

By Reuters

  • 11 Oct 2011

Car sales in India are expected to rise just 2 to 4 per cent this fiscal year, an industry body said, cutting its forecast for the second time this year, as high interest rates and rising costs continue to hit demand in Asia's third-largest economy.

The growth forecast is down from the earlier estimate of 10 to 12 per cent by the Society of Indian Automobile Manufacturers (SIAM), and 16 to 18 per cent before that. Car sales had jumped 30 per cent in the fical year 2010/11 that ended March.

"If the government continues to raise fuel prices and interest rates continue to go up the demand for cars will remain subdued," S Sandilya, President, SIAM and Chairman, Eicher Motors, told reporters.


Indian car sales last grew in single digits in 2008/09, at 1.39 per cent.

Demand for cars in the world's second-fastest growing auto market after China has also been dented in recent months by rising vehicle costs, with many first-time buyers plumbing for motorcycles or scooters.

Car sales fell 1.8 per cent in September to 165,925 cars, data released by SIAM showed on Monday. Demand for cars shrunk in July for the first time in nearly three years.


However, sales of commercial vehicles, a key pointer to the country's economic activity, rose 18.05 per cent to 70,634, while motorcycle sales rose 19.93 per cent to 933,465 vehicles.

The RBI has raised interest rates 12 times since March last year in an effort to battle stubbornly high inflation, a move that has hurt credit-based purchases and slowed economic growth.

The Indian car market, which saw a 10 per cent decline in August, is driven by a burgeoning and aspirational middle class that mostly relies on bank loans for purchases.


Maruti Suzuki, India's largest car maker, and 54.2 per cent owned by Japan's Suzuki Motor Corp, posted a 21 per cent drop in September sales, but rival Tata Motors, which makes both commercial vehicles and cars, reported a 22 per cent increase for the month.

"The way things have been going in the last few months, this is a realistic number. While there is some uptick in festive demand, it's nowhere close to what it was in the last two years," said Vineet Hetamasaria, auto analyst at Mumbai's PINC Research.

SIAM raised its growth forecast for commercial vehicles to 13 to 15 per cent, from the earlier forecast of 12 to 14 per cent.


"Demand for movement of goods still remains, because the economy is still growing at 7 to 8 per cent," SIAM's Sandilya said.

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