Growth of Car Sales Slow Down to 7%

Sales of passenger cars in the Indian market were the slowest in the last 24 months, this May, at 7% as hike in interest rates and fuel prices discouraged consumers from making any new purchases. Data released from SIAM stated that car sales in the domestic market were around 1,58,817 models last month, in comparison to the 1,48,425 models sold in the corresponding period, last year.

The Senior Director of SIAM, Sugato Sen, said that this was the slowest period of growth since May 2009, when there was an increase of only 2.77%. Car sales last grew in single digit figures back in June 2009, when the sales stood at 8.23%. Ever since then, the sales have been growing in double digit figures.

Sen further said that in case of retail sales there have been obstacles like non-availability of financial facilities, hike in fuel prices and increase in vehicle prices. The sentiment prevalent in the market is not positive, and by the next month, they expect this fact to be reflected in sales figures.

He also said that it is unlikely that a forecast for the sales of passenger cars for this fiscal year can be achieved under these conditions. However, they have not yet reviewed it. This review will take place in the next month after they have completed this fiscal year’s first quarter. SIAM had estimated a 16 to 18% growth in sales of passenger cars for the fiscal year 2011 to 2012, whereas they estimated the overall industry to increase by 12.15%.

Sen said that they are most anxious because RBI changed the conditions for NBFCs. Because of the new rules, NBFC’s cannot give loans for the purchase of non-transport vehicles that are classified as personal vehicles. They will also not receive any re-finance from banking institutions. All this will affect the industry badly.

Maruti Suzuki India, which leads in the passenger car segment, posted an increase of only 0.99% in sales for May, selling around 76, 874 models, whereas Hyundai Motors India saw a growth of 14.18%, selling 31,001 models. Tata Motors in fact, saw a drop of 12.56% in sales, selling around 16,280 models.

The sales of two wheelers, however, rose by 14.49% in May, selling 10,72,287 models, in comparison to the 9,36,555 models sold in the corresponding period, last year, according to information released by the SIAM. The sales of motorcycles increased by 14.33%, selling 8,29,255 models against the earlier 7,25,311 models.

Hero Honda saw an increase of 13.54% in sales, selling 4,55,662 models. Bajaj Auto saw an increase of 13.87% in sales, selling around 2,18,231 models last month, whereas Honda Motorcycle & Scooter India saw their bike sales rise by 10.2%, selling around 60,733 models. The company’s scooter sales however saw a drop of 2.56% to 75,012 models, whereas TVS and Hero Honda grew by 17.13% and 24.10%, respectively.

The sales of three wheelers also increased by 8.6%, selling around 35,991 models against the 33,140 models sold in May, 2010. Sen said that LCV’s also saw a lot of growth in the market of CV’s. However the sales of M&HCVs slowed down, which is worrying as it reveals the economy is slowing down. LCV’s grew by 22.9% selling 31,451 models against the 25,590 models sold in May, 2010.

SIAM added that the overall vehicle sales across the categories grew by 13.40%, selling a total of 13,70,786, against the 12,08,820 models sold in the corresponding period last, year.

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