Biggest Drop in Almost 11 Years for Indian Car Sales

In October, the local car sales in India fell to the lowest in the last 11 years. Asia’s third-largest car market has put brakes in spending due to spiralling petrol prices, more expensive loans as well as the continuing pressures of inflation.

In a downward trend continuing now for four consecutive months, the local car sales have dropped by 24% to 138,521 units as against 181,704 a year back. This data was released on Wednesday by the Indian Automobile Manufacturers Society.

Since December 2000, when car sales had dipped by 35%, this is the biggest sales drop.

The worst hit segment is the passenger-car sales. This segment being price-sensitive, continuous increase in fuel prices and higher interest rates, have directly affected the demand, according to Deepak Jain, an analyst at Sharekhan Ltd, a Mumbai-based broking firm. The next two months are also not expected to be any better, he said.

Biggest Drop in Almost 11 Years for Indian Car Sales

The auto industry is being plagued continuously by higher fuel costs and rising loan rates. Even the Indian festive season between September and October, when it is considered auspicious to make new purchases, could not revive its fortunes.

Since March 2010, the Reserve Bank has increased lending rates about 13 times, aimed at taming the inflation rate, which continues remaining above 9% for nearly a year now.

Since January, the gasoline prices have been raised 23% by India’s oil refiners, citing volatile crude prices.

Diesel prices continue to remain cheaper though, as they have a direct impact on inflation, as Indian trucks operate on this fuel.

This has enhanced the demand for the diesel variants of cars, which, owing to production constraints, are in short supply.

The Director General, SIAM, Vishnu Mathur says that that the only demand that they have been witnessing is for diesel-run vehicles. The price difference between gasoline and diesel is to the extent of Rs.30 ($0.6) per liter in some of the cities.

October sales were further impacted by labor strikes in Maruti-Suzuki India Ltd, a company that controls half the local market.

Maruti cars sale

Suzuki Motor Corp. locally sold 41,192 cars in October, a decline of 55% over last year, mainly because they had made 40,000 lesser vehicles this month.

1,500 workers of Maruti went on strike in both its North India based factories, thereby impacting production.

Local car sales of Hyundai Motor Co. dropped by 5% to 32,811 units whereas Tata Motors Ltd. too had a marginal decline by selling 20,948 units.

Sales of trucks and buses however rose by 19% to 61,800 units. This was due to the strong demand for vehicles from Ashok Leyland Ltd. and Tata Motors.

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