India's Nov car sales plunge, worst fall in 8 years

By C.J. Kuncheria

NEW DELHI (Reuters) - Car sales in India plunged by nearly a fifth in November, the worst fall in eight years, as high borrowing costs, tight credit and a slowing economy dragged down demand, an industry body said on Wednesday.

Sales of trucks and buses -- closely linked to industrial activity -- slumped by nearly half from a year ago, steeper than a fall of 48.6 percent in January 1998, according to data from the Society of Indian Automobile Manufacturers.

"In our history, all segments have never been down so badly together in a month," SIAM's director general, Dilip Chenoy, told reporters after releasing the month's numbers.

Car sales in November fell an annual 19.4 percent to 83,059 units from 103,031 a year ago. Commercial vehicle makers sold 20,637 units, compared with 40,879 units in the same period a year ago. Firms sold 431,171 bikes, down from 540,553 last year.

Asia's third-largest economy is widely expected to slow to around 7 percent in the year to March 2009, compared with expansion of 9 percent or more expansion in the last four years.

Industrial output has flagged in recent months and manufacturing contracted sharply in November, the first such instance since the index began 3-½ years ago.

In a bid to pump prime the economy, the Reserve Bank of India (RBI) has cut its key short term lending rate by 250 basis points since mid October to 6.5 percent. Before that, the rate was at a seven-year high of 9 percent.

But banks have been slow in passing on the rate cuts to customers, and auto loans remain scarce and expensive.