India: June car sales slowest in more than 2 years

The Economic Times (New Delhi) - Car sales in India rose 1.6 percent in June, their slowest pace of growth in more than two years, as rising interest rates, fuel prices and vehicle costs shrunk demand in the world's second-fastest growing auto market.

Indian auto sales, which grew at a breakneck pace of 30 percent in fiscal year 2011, are driven by a burgeoning aspirational middle class that relies mainly on bank loans for its purchases.

But India's central bank has raised interest rates ten times since March last year in an effort to battle stubbornly high inflation, a move that has forced consumers to tighten their purse strings.

"This was expected. Rising interest rates and inflation are contributing to slowing sales. Also, ahead of the monsoons, demand for cars typically slows down," Kishor Ostwal, chairman at brokerage CNI Research, said. 

Sales at top car maker Maruti Suzuki India fell 8.8 percent to 80,298 vehicles in June, marking the first fall since December 2008.

Production at Maruti, majority-owned by Japan's Suzuki Motor , was hurt by a strike last month that led to a production loss of about 16,000 cars.

Sales at Tata Motors , India's largest maker of trucks and buses and the manufacturer of the Nano, touted as the world's cheapest car, fell 1 percent. Sales of the Nano plunged 29 percent.

Indian automakers sold 143,370 cars in June, their slowest pace since March 2009, according to data from the Society of Indian Automobile Manufacturers (SIAM) released on Monday.

Sales of trucks and buses however, a key barometer of economic health, rose 17.8 percent to 62,009 vehicles in June.

SIAM earlier this year said it expected car sales growth to drop to 16 percent this fiscal year, a sharp cut from the 30-percent growth seen last year.