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Car sales growth slows to two-year low


Rising fuel prices and interest rates continue to take a toll on car sales. A total of 11 passenger vehicle makers reported 4 per cent sales growth in June. They sold 1,73,181 vehicles compared to 1,66,758 in the corresponding period last year.

This is the slowest growth recorded by the industry in two years.


In May, passenger vehicle sales growth had slumped to its lowest in 20 months by growing 8 per cent to 206,194 units. The slowdown has forced the Society of Indian Automobile Manufacturers (SIAM) to revise sales forecast for the year.

A senior SIAM executive said, “There are bottlenecks such as high interest rates, non-availability of finance and rising fuel and vehicle prices. Consumer sentiment is not positive. We will revise downwards our sales forecast for the financial year.” It had earlier this year projected that the passenger vehicle segment would grow 16-18 per cent to three million units in 2011-12.

The country’s largest car maker, Maruti Suzuki India (MSIL), posted a 3.4 per cent drop in sales to 70,020 units. It said sales were hit due to annual maintenance shutdown at Gurgaon and Manesar plants. It had suffered a production loss of 12,600 units due to a 13-day strike at its Manesar facility earlier last month.

However, the sentiment in the market is so bearish that parent Suzuki Motor Corporation (SMC) has revised downwards MSIL’s sales growth target. Last week, Osama Suzuki, chief executive officer, SMC, said, “With inflation and other issues, a decision was taken to lower the sales growth forecast for this financial year from 13 per cent to 8 per cent. But I personally think a 5 per cent rise will be about right.” This will mean sales of 1.18 million vehicles in 2011-12.

Though Hyundai, Volkswagen, Mahindra and Toyota recorded double-digit growth, they were largely helped by new models and a low base. Arvind Saxena, director (marketing and sales), Hyundai Motor India (HMIL), said, “The market continues to be weak but Hyundai sales have grown partially due to the success of the new Verna. We have received over 21,000 bookings for Verna so far.”

HMIL posted 11 per cent growth and sold 30,402 units. However, this is less than the 31,123 units it sold in May this year.

Tata Motors, India’s third-largest car maker, failed to arrest the fall in sales.

The company recorded the steepest decline in sales in the industry. It sold 21,993 units, 21 per cent less than the 27,811 units in June last year. All its models suffered from low demand. It sold 5,451 units of Nano, 29 per cent less than in June last year.

V G Ramakrishnan, senior director, Frost & Sullivan, said, “We are expecting the auto industry to grow 9 per cent this financial year. If interest rates stabilise, growth could be 11.5 per cent, but it is unlikely to go beyond 12 per cent.”