India car sales slow in June

India's leading car makers Maruti Suzuki and Tata Motors on Friday reported a drop in monthly sales, as rising vehicle prices, fuel costs and costlier auto loan rates hit consumer demand.

Maruti posted its first drop in sales for more than two-and-a-half years, blaming the fall on a strike at one of its factories last month that hit production.

The company, which is majority-owned by Japan's Suzuki Motor Corp., sold 80,298 units in June, down 8.8 percent from a year earlier. It last showed a drop in sales in December 2008, analysts said.

Tata Motors, which makes the world's cheapest car, the Nano, said it sold 66,358 commercial and passenger cars in the same period, down one percent year-on-year. The Nano sold 5,451 units, down 29 percent year-on-year.

Tata Motors last saw a decline in total sales in June 2009.

US giant Ford's subsidiary, Ford India, saw sales grow 7.8 percent to 9,145 units in June, aided by continued strong sales of its Figo model. But the increase was less than half the level of that in May.

Indian auto makers have been forced to push up prices of vehicles by an average four percent in the past year, as prices of key commodities like steel and rubber have jumped up.

Maruti, which has seen its pace of sales growth slow for three straight months, also attributed its fall in sales to a planned, six-day maintenance shutdown of its Manesar and Gurgaon factories in northern Haryana state.

"Production in the company's Manesar plant in northern state of Haryana was impacted due to a strike by a section of employees," the stock market statement said.

Car assembly stopped for 11 days last month as 2,000 workers at the Manesar plant downed tools to demand the recognition of a new union.

The walkout cost Maruti nearly $93 million and hit the production of about 12,600 cars, mainly its high-end, mid-sized D'zire and SX4 models. The company was confident at the time that delivery would not be affected.

But a company spokesman told AFP on Friday: "We had inventory for a few days but as the strike extended, some of our models were not available."

Among other companies, South Korea's Hyundai Motor India showed a 13.6 percent rise in June sales at 52,531 units.

Car sales in India - seen as a bellwether of economic health - are starting to moderate after breakneck growth for nearly two years, as auto loans get costlier and input and fuel costs rise.

"Demand for cars in India will grow but at a subdued pace" as exports have slowed, said Mahantesh Sabarad, auto analyst with Fortune Equity Brokers.

Maruti's small car models, including the popular M-800, Alto and A-Star, as well as the SX4 and D'zire plus the multi-utility-vehicle segment all showed lower year-on-year sales in June.

India, where just one in 10 households in urban areas owns a car and one in 50 in rural areas, is the world's fastest-growing auto market.

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