India monthly auto sales rise but forecast poor

Daily Times (Mumbai) - New car sales in India rose seven percent in November, the first year-on-year increase in five months and a respite after their worst slump for a decade, industry data showed Thursday.

But despite the gain, the Society of Indian Automobile Manufacturers (SIAM) said the country is unlikely to meet its modest growth forecast for car sales in the fiscal year to March.

SIAM has sharply cut its forecast for Indian car sales growth in the fiscal year to between two and four percent, down from an earlier projection of 10-12 percent.

“We have seen a small rise (in November). But looking at the overall trend, we expect some kind of downward revision in our growth forecast for the full-year,” SIAM’s senior director Sugato Sen told AFP.

Sen refused to say how deep the correction could be, adding that “a revision is likely to take place in January”. SIAM figures showed that domestic passenger car sales increased to 171,131 last month, up from 159,939 in the same period in 2010.

That followed a 24 percent year-on-year fall in October — the sharpest since December 2000 — as high interest rates and rising fuel prices hurt demand.

Car sales had been slowing in India mainly due to high borrowing costs, hitting one of the world’s fastest-growing auto sectors, which has attracted interest from major global players.

Total passenger car sales fell 3.5 percent to 1,219,509 units between the start of the financial year on April 1 and the end of November, compared with 1,264,142 in the same period last year. India’s biggest auto maker Maruti Suzuki said monthly sales for November fell 18.5 percent, although the company is recovering from damaging labour unrest at one of its factories in north India.

Business leaders have repeatedly urged the country’s central bank to stop raising interest rates, as it is hitting investment and growth.

The Reserve Bank of India has increased rates 13 times since March 2010 but recently signalled a possible pause.

Last month, data showed India’s economy grew 6.9 percent in the three months to the end of September — its slowest rate in more than two years, caused by the monetary tightening and a weakening global economy.

Consumers have been reluctant to buy cars due to rising fuel costs, with state-run oil firms hiking prices four times this year. In addition, car loans have become costlier due to the rate hikes, while car prices have risen because of steeper global commodity prices.

Some auto makers have posted consistently higher monthly sales.

Ford said it sold 10,091 units in November — a 21 percent increase year-on-year — while Tata Motors reported a 40.64 percent increase in total sales to 76,823 units.

Analysts, however, said a revival for the overall auto sector could take time, even if the RBI keeps interest rates on hold at its next monetary policy meeting on December 16.

“Bearishness has crept into the minds of the consumer,” said Jagannadham Thunuguntla, head of research with New Delhi-based SMC Global Securities. afp