India car sales growth slowest for two years

Indian car sales grew at the slowest pace in two years in May, industry data showed Thursday, as price hikes, rising fuel costs and costlier loans kept buyers out of showrooms.

Passenger car sales in Asia's third-largest economy rose by seven percent to 158,817 units in May from 148,425 units in the same month the previous year, the Society of Indian Automobile Manufacturers (SIAM) said.

The growth was nearly half of the 13 percent year-on-year jump in April and down from the 24 percent growth recorded in March.

Sales of trucks and buses - a key barometer of economic activity - rose 16.16 percent in May from a year earlier to 56,314 units in May, the industry body said.

"This is the slowest growth rate since May 2009, when the increase was just 2.77 percent," SIAM senior director Sugato Sen told reporters.

"The sentiment in the market is not very positive," he added, expressing concerns that the Indian auto sector may fall short of its predicted 12 to 15 percent growth in the current financial year, which ends in March 2012.

SIAM will review data projections next month, Sen said, adding that he expected sales to grow at a slower rate in June.

Domestic car sales grew by 30 percent to 1.98 million units during last year - the most in more than a decade - fuelled by an increasingly affluent middle class, new model launches and cheap loans.

But rising vehicle prices and a series of interest rate hikes by India's central bank to tame inflation have impacted demand for cars, analysts said.

"Monetary policy tightening is taking a toll," said Jagannadham Thunuguntla, head of research at SMC Global Securities in New Delhi.

"We could see modest growth for the rest of the year, as discretionary products are taking a backseat," he told AFP.

Indian auto makers Maruti Suzuki India, Tata Motors and Mahindra and Mahindra have raised prices of vehicles by an average 1-2 percent in the year.

sal/phz/bgs

 

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