Oct car sales suffer biggest fall in a decade

NEW DELHI Wed Nov 9, 2011 11:57am IST

A worker adjusts the windscreen wipers of a parked car at a Maruti Suzuki stockyard on the outskirts of Ahmedabad September 1, 2011.REUTERS/Amit Dave/Files

A worker adjusts the windscreen wipers of a parked car at a Maruti Suzuki stockyard on the outskirts of Ahmedabad September 1, 2011.

Credit: Reuters/Amit Dave/Files

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NEW DELHI (Reuters) - Car sales in India fell 23.8 percent in October, the biggest monthly percentage decline since December 2000, an industry body said on Wednesday, as high interest rates and vehicle costs drove down sales for a fourth consecutive month.

Rising finance costs and increasing prices have deterred buyers in Asia's third-largest economy, hurting carmakers that only months ago cheered a 30 percent rise in sales over the previous financial year.

"People who have taken a loan to buy a car already have a home loan," Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers (SIAM). "A rise in interest rates will discourage him to take that car loan."

The industry body last month slashed its sales growth forecast for the current financial year to 2-4 percent, the second cut in estimates from an initial forecast of 16 to 18 percent.

The market is driven by a swelling aspirational middle class that mostly relies on bank financing for purchases. The Reserve Bank of India's 25 basis point increase in interest rates last month was its 13th hike since March 2010.

Indian automakers sold 138,521 cars last month, according to SIAM, with petrol car sales hit the hardest.

"There is hardly any demand for petrol cars today," said Mathur. "Demand for diesel cars is going up, but there is not so much capacity."

Sales fell 1.8 percent in September, 10.1 percent in August and 15.8 percent in July, the first slide in three years.

Carmakers had hoped for a sales boost in October, typically a bumper month due to a string of religious festivals that traditionally encourage Indians to make big-ticket purchases.

Maruti Suzuki, the country's top automaker, said last week it had sold less than half the cars in October as it did a year previously as months of labour unrest that crippled production compounded the slowdown in demand.

Strikes since August by disgruntled workers have cost the carmaker more than $500 million in lost production and slashed its market share to 40 percent from over 50 percent last year. Maruti is 54.2-percent owned by Japan's Suzuki Motor Corp.

"Maruti is one of the major reasons (for the fall)," said Mathur. "There will be some kind of correction in coming months if Maruti comes up to full capacity."

Rivals Tata Motors and Mahindra & Mahindra have benefited from Maruti's woes, with Tata sales up 5 percent last month and Mahindra sales jumping 20.3 percent, according to company data.

Domestic carmakers are seen reporting lower revenues and tighter margins in the quarter ending September. Maruti posted a 60 percent fall in profits for the quarter ending September, almost double the estimates.

However, sales of commercial vehicles, a key indicator of the country's economic activity, rose 18.5 percent to 61,800, SIAM said.

Sales of motorcycles, used as a family vehicle by millions of Indians, rose 0.7 percent to 879,883 vehicles.

(Writing by Henry Foy; Editing by Ranjit Gangadharan and Matt Driskill)

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