Indian Vehicle Sales Tumble

In a shocker that reveals how much the recent interest rate hike has bitten into car sales in India—the second fastest growing market for automobiles in the world—data for July this year shows a decline in sales for the first time in over 30 months.

Domestic passenger car sales have registered a 15.76% decline in July this year mainly due to hikes in lending rates and lower production by market leader Maruti Suzuki during the month.

Car sales in the country stood at 1,33,747 units in July, 2011, as against 1,58,767 units in the same month last year, according to figures released by the Society of Indian Automobile Manufacturers (SIAM) today.

"This is the first time since January, 2009, that car sales have fallen. Interest rates and fuel prices were going up in recent months and that led to an overall negative sentiment in the market," SIAM Director General Vishnu Mathur told reporters.

The car market last witnessed a fall in January, 2009, when sales shrunk by 3.16% year-on-year. Last month's decline is the steepest since November, 2008, when car segment sales fell by 19.34%, he added.

The production loss at Maruti's Manesar facility due to preparations for the launch of its new Swift model and realignment of its DZiRE model's output also severely impacted sales, he said.

Earlier this month, Maruti Suzuki India (MSI) said that due to these two planned activities, sales in July were negatively impacted by nearly 17,000 units.

"There is no lack of demand, but just lack of conversion of demand into purchases by customers," Mathur said.

SIAM Senior Director Sugato Sen said non-availability of certain components like castings also impacted the output of many car-makers.

During the month, MSI India posted a 31.04% dip in domestic car sales to 52,483 units.

Rival Hyundai Motor India's sales were down by 11.49% to 25,501 units. Tata Motors saw a decline of 43.13% in sales to 13,997 units during the month.

When asked about the outlook, Mathur said: "Interest rates and fuel prices are challenges for the market. Hopefully, interest rates have reached their peak... If crude continues to soften, then there may be some positive impact as it will lead to inflation coming down."

The forthcoming festive season is also likely to help car-makers push sales, but to what extent it can boost growth has to be looked at, he added.

The auto industry has started slowing down this fiscal, with the passenger car segment growing by only 7% in May. In June, it saw its slowest growth rate in 27 months of 1.62%.

SIAM had last month revised the growth projection downward to 10-12% for 2011-12, as against its earlier forecast of 16-18%.

According to SIAM, two-wheeler sales increased by 12.61% in July, 2011, to 10,56,906 units from 9,38,514 units in July, 2010.

Motorcycle sales grew by 10.51 per cent during the month to 7,85,278 units from 7,10,621 units in the corresponding month last year.

Hero MotoCorp (formerly Hero Honda) continued its impressive performance with a 13.89% increase in sales to 4,43,948 units. Rival Bajaj Auto also posted a 5.30% increase in sales to 2,02,326 units during the month.

However, Honda Motorcycle and Scooter India (HMSI) saw its bike sales falling by 6.52% to 51,920 units. Chennai-based TVS Motor Co saw its motorcycle sales going up by 9.58% to 48,091 units during the month.

The scooter segment witnessed a growth of 23.03% in sales during July this year to 2,05,695 units from 1,67,195 units in the same month last year.

HMSI's scooter sales during the month were up 19.54% to 89,869 units, while that of TVS Motor Co grew by 20.47% to 46,324 units. Hero MotoCorp's scooter sales during the month grew by 36.29% to 33,766 units.

Three-wheeler sales during July, 2011, declined by 3.13% to 43,949 units from 45,369 in the same month last year.

Sales of commercial vehicles jumped by 23.70% to 64,241 units from 51,934 units in the year-ago period.

Light commercial vehicle sales grew by 35.95% to 37,111 units from 27,297 units last year. Medium and heavy commercial vehicle sales stood at 27,130 units as against 24,637 units in July last year, up 10.12%, SIAM said.

Total sales of vehicles across categories registered a growth of 8.99% to 13,48,753 units in July, compared to 12,37,521 units in the same month last year, it added.