Car makers say Feb sales fall; high costs, economy weigh

MUMBAI (Reuters) - Top car makers reported falling sales in February as high costs and sluggish economic growth continued to weigh on demand, threatening to result in the industry's first decline in annual sales in a decade.

Car sales during the first 10 months of the current financial year that ends on March 31, were down 1.8 percent compared to the same period last year, according to the Society of Indian Automobile Manufacturers (SIAM).

Over the past few years, billions of dollars of investment has poured into the industry from the world's biggest car makers, hungry for growth. Sales grew a record 30 percent in the year to March 2011 and annual sales have grown every year since the financial year that ended in March 2003, according to data from SIAM.

Indian car makers have been hit by high interest rates and rising fuel costs. They had hoped incentives to boost the industry would be announced in the country's budget yesterday, but instead saw taxes rise on some sports utility vehicles (SUVs), risking growth in the market's only bright spot.

Maruti Suzuki India Ltd (MRTI.NS), India's biggest car maker, said its car sales fell 10.9 percent in February. Hyundai Motor Corp's Indian unit, the country's No.2, said its domestic sales dropped 7.6 percent during the month.

Tata Motors, the country's third-largest car maker, said its February sales were down 33 percent. Combined, the three companies account for 75 percent of the car market.

"It should definitely end the year negative" said Joseph George, auto analyst at IIFL in Mumbai.

Ford Motor Co's (F.N) Indian unit said its domestic sales fell 44 percent in February.

GRAPHIC: Indian car sales, click link.reuters.com/tyc46t

Mahindra & Mahindra Ltd (MAHM.NS), whose growth in sales of SUVs has been one of the industry's fastest, said its overall domestic sales rose 10 percent in February, but its SUVs are not included in car sales data compiled by SIAM.

(Reporting by Henry Foy; Editing by Elaine Hardcastle)