Bloomberg News - India's automakers' association may cut sales growth forecast for a second time this year as rising borrowing costs and fuel prices deter customers, said Pawan Goenka, president of the group.
Passenger vehicle sales dropped 5.7 percent in August from a year earlier, said Goenka, head of the Society of Indian Automobile Manufacturers. That's the second straight month of decline. Car makers are banking on India's festive season to revive sales, he said. The group may cut its forecast should sales remain stagnant through next month, Goenka said.
India's central bank has raised interest rates 11 times since mid-March 2010 to slow inflation, driving down demand for cars in a country where about 80 percent of all purchases are funded by loans. Maruti Suzuki India Ltd., maker of almost half the cars sold in India, cut output because of poor demand, Chairman R.C. Bhargava said on Aug. 12.
"The industry is hoping that the festive season in September and October will help increase sales," Goenka said at the association's annual convention in New Delhi today. "If we see double digit growth in these months then it may lead to further sales going forward."
India's festival season began on Aug. 31 with Eid-ul-Fitr and runs through to Diwali, the Hindu festival of lights, celebrated on Oct. 26. The Society on July 11 said it expects sales to rise 10 percent to 12 percent in the year ending March 31, down from an earlier forecast of 16 percent to 18 percent.
"The market is tough and the economic issues are clearly impacting buyer sentiment," said Arvind Saxena, the head of sales for Hyundai Motor Co.'s Indian unit.
'Single Digit' Growth
State-owned Indian Oil Corp., the country's largest refiner, increased the price of gasoline by 5 rupees a liter to 63.37 rupees ($1.4) in New Delhi in May. That was the biggest increase since June 2008.
Maruti reported a decline in sales for the third straight month in August. Domestic sales fell 17 percent to 77,086 units, Maruti said in an e-mailed statement on Sept. 1.
The Indian unit of Suzuki Motor Corp. sold 26 percent fewer vehicles locally in July from a year earlier and posted a 3.8 percent drop in sales in June.
The company expects "single digit" sales growth in the year ending March. Maruti had earlier forecast growth of as much as 15 percent, Mayank Pareek, Maruti's sales chief, said on Aug. 18.
Toyota Motor Corp.'s Indian unit expects industrywide car sales to grow as little as 8 percent this year, according to Sandeep Singh, the deputy managing director of the unit. The festive season may only temporarily improve sales, Singh said.
