Car sales in India expected to fall this financial year

The current financial year ending March would see car sales in India fall, marking a second straight year of decline, as high interest rates and a slowing economy force consumers to delay purchases, according to industry body.

Car sales in India, stood at 163,199, last month, a drop of 3.9 per cent from a year earlier, according to data released by the Society of Indian Automobile Manufacturers (SIAM).

The industry body had estimated in April that car sales would grow by 3-5 per cent this year, but had indicated in recent months that they might fall instead.

According to Vishnu Mathur, director general of SIAM, car sales in India had declined continuously in the first nine months of the year.

Mathur said the decline was now moderating and, if it kept on moderating at this pace, zero growth might be seen in January-February.

The year would definitely be negative, he added.

Sales of motorcycles were up 18.1 per cent in October to a record 1.1 million, as the festive season boosted demand with strong sales in rural regions, where incomes were boosted by good monsoon rains.

Many Indians consider the months September to December, marked by a number of festivals, to be auspicious for making big-ticket purchases.

For several years, growth in India's car market had outpaced that in Western Europe and the US thanks to the easy availability of low-cost loans and rising personal incomes. This led to companies such as Toyota Motor Corp, Honda Motor Co, Nissan Motor Co, Ford Motor Co, investing billions of dollars in India to build manufacturing facilities or expansion of existing factories.

Sales had hit a few roadblocks in recent times and borrowing costs had surged with accelerating inflation leading the central bank to raise its main lending rate several times in the past few years. Fuel prices had increased too, with the government lifting control on gasoline prices in June 2010 and partially freeing diesel rates.

Customer sentiment had also suffered by falling economic growth that had led to fears of job losses.

Auto makers were trying to turn things with the introduction of new models or upgrades of their existing vehicles as also discount offers. While this had helped to an extent, overall demand had continued to remain subdued.

The Wall Street Journal, quoted Mathur as saying that there were little bits of green shoots here and there but not very big green shoots. The negative sentiment continued, he added.