Indian auto firms see no quick end to growth woes

By C.J. Kuncheria

NEW DELHI (Reuters) - The Indian automobile industry faces a bleak outlook this fiscal and the next with falling vehicle sales, high interest costs and raw material prices squeezing margins, industry officials said on Monday.

Data on Monday showed car sales in October declining for the third time in four months, and sales of trucks and buses slumping 36 percent on the year.

Demand has been weak as automobile loans remained dear and scarce as economic activity slowed. The top two truck and bus makers have cut production to avoid inventory build-ups and more could follow suit.

"The outlook is not good. April-September growth was 10 percent. October has been so bad, overall growth has come down to 5 percent," Dilip Chenoy, director general of the Society of Indian Automobile Manufacturers, said.

"We're only the mirror image of what the vehicle manufacturer is," J.S. Chopra, president of the Automotive Component Manufacturers' Association of India (ACMA), said. "If vehicle manufacturers cut back, component manufacturers will also cut back in the same proportion."

Reduced vehicle production means fewer orders for component makers, who would see their inventory costs rising as they have to store the incoming raw materials, Chopra said.

Even exports, a driver for parts manufacturers, are slowing as carmakers worldwide combat the global slowdown. ACMA figures show exports grew 6 percent in the April-Sept, against a 25 percent compounded annual growth in the last five years.

In the April-Oct, car sales rose just 3.5 percent, down from the 11.8 percent in the year to March 2008. Commercial vehicle sales contracted nearly 3 percent in the period, against 4.1 expansion last year.