Car sales drop for the second month in a row; two-wheeler sales zip ahead

11 September 2008

Mumbai: Indian passenger car sales dropped for the second month running in August 2008, on account of demand being impacted by higher loan rates in the case of hatchbacks.

August 2008 sales data showed a drop of 4.4 per cent to 94,584 units, from 98,893 units a year earlier, according to a statement by the Society of Indian Automobile Manufacturers (SIAM).

Factors being blamed for the drop in sales include inflation, which is near its 13-year high, and the fact that loan rates have almost doubled during the past five years, dampening consumer spending.

SIAM has dropped its annual growth forecast for 2008 to 10 per cent. Previously, the industry body was optimistic of achieving a 13-per cent growth rate this year.

The Reserve Bank of India (RBI) had raised its benchmark interest rate for the third time in two months because of slow inflation, on 29 July. Consequently, auto loans now come at a high 14 per cent, as against the prevailing seven per cent rate in 2003. Over 50 per cent of the vehicles sold in India are bought on credit.
Market leader Maruti Suzuki India, along with Tata Motors posted negative growth rates in August.

Maruti Suzuki sales dropped 10.07 per cent at 46,811 units as against 52,055 units year on year. Tata Motors sales too dipped 10.10 per cent at 12,216 units as compared to 13,588 units in the same month last year.