Auto News

Car sales post slowest growth in 27 months in June

By Motortrend India Staff   |   11 July,2011

Domestic car sales fell for the third straight month in June, its lowest in 27 months, prompting the industry body to scale back the year's projection for the second time this fiscal.

Sales rose just 1.62 percent in the month as against 7 percent in May and 13 percent in April, data released by the Society of Indian Automobile Manufacturers (SIAM) on Monday showed. The growth is the slowest since March 2009, when sales grew 1.16 percent.

Demand for vehicles in India, an important indicator of the country’s economic health, is led by a middle class that is guided by the cost of fuel and loans in it decision to buy. Fuel prices have risen almost 9 percent in the last two months and the central bank has pushed up policy rates 10 times since March 2010 to curb inflation.

“The times are tough. Any singledigit growth raises concerns for corrective steps to improve demand and restore consumer sentiments,” said SIAM president Pawan Goenka, who is also president (automotive & farm equipment) at Mahindra & Mahindra.

He, however, said some turnaround could be expected during the festival season beginning September end. India has the world’s second-fastest growing auto market after China. According to the industry body, 143,370 units were sold in June, against 158,817 in May and 1.98 million for the full 2010-11 fiscal.

SIAM expects sales growth to slip to 10-12 percent in the current financial year, after being near 30 percent in the preceding two years. Last month, it had revised its sales growth forecast to 12-15 percent from 10-16 percent projected in April.

Carmakers say over 80 percent of new cars sold in India are bought on loans, but rising interest rates have pushed it down to about 70 percent.

“There has been a total change in scenario, and taking a realistic view we have downgraded the sales that are expected to portray the fiscal on the ground level,” said Vishnu Mathur, director-general at SIAM. Analysts say the macro-economic changes over the past few months have gone against the auto industry.

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