CAR sales in India slid by over 10 per cent in April, industry data showed on Friday (May 10), marking the longest ever stretch of monthly declines in the country’s once red-hot car market.
“We have never seen a successive monthly decline of six months,” said the Society of Indian Automobile Manufacturers (SIAM)’s senior director Sugato Sen, who called the latest numbers “not good”.
Domestic passenger car sales, seen as a pointer to overall economic health, fell by 10.43 per cent to 150,789 vehicles in April from the same month a year earlier.
High borrowing costs, worries over a sharp slowdown in the economy and costly fuel have kept buyers out of showrooms. The weak demand has forced automakers to introduce “buy now, pay later” schemes, interest-free repayments and double-digit discounts.
Sen said he expected the market to remain sluggish for another two to three months, but added that purchases could pick up once auto loans become cheaper.
India’s central bank last week cut its main interest rate by 25 basis points – its third such reduction this year – in an effort to kickstart sharply slower economic growth.
The Congress party-led government expects at least six per cent growth this year after the economy grew by an estimated five per cent in the previous year, its lowest rate in a decade.
Domestic passenger car sales fell by 6.7 per cent in the year to March 2013 to 1.89 million units from a year earlier – the first contraction in 10 years.
Car sales are projected to grow by three-to-five per cent in the 12 months to March 2014, according to SIAM, but this is far below a record 30-per cent rise notched up in 2010-11.
The declining sales have raised questions about large investments by foreign auto giants building new capacity in India.
Ford, for instance, has earmarked nearly $1bn (£649m) to build a plant in Gujarat that will be able to turn out 240,000 cars a year by 2014.
GM, Toyota Motor Corp and Maruti Suzuki have also been boosting capacity to meet what they hope will be big growth in a market that could equal China’s and offset weakness in the developed world.
Still, India – with its 1.2-billion population, low penetration of car ownership and rising incomes – is a compelling destination for international carmakers aiming to hike sales in the longer term, analysts say.
The number of cars per 1,000 Indians is just 15 compared to 58 in China and around 800 in the US, according to analysts.
On the April sales, Mahantesh Sabarad of Fortune Equity Brokers said: “Despite the fall, the quantum of decline has been narrowing which is a good sign.”
Analysts expect demand to also be helped by forecasts of a normal monsoon, which should improve rural demand and automakers’ new model line-ups.
Ford is set to launch its mini sports-utility-vehicle EcoSport while Mahindra & Mahindra will unveil its hatchback Verito Vibe. A new small car from Hyundai India is also expected, analysts say.
