India Auto-Industry Body Forecasts Lower Car Sales

India's automobile-industry association Tuesday forecast a second consecutive year of lower car sales, as a slowing economy crimps demand in what was seen until a few years ago as a growth market by global vehicle manufacturers.

Continued weak demand has forced the Society of Indian Automobile Manufacturers to scale down its estimate of 3%-5% sales growth given in April for the year ending March 31, said Sugato Sen, its deputy director general.

He didn't say how much the sales could fall this year.

Weak consumer sentiment because of the economic slowdown, worsened by rising fuel prices and higher borrowing cost, is taking a toll on sales in the world's sixth-largest car producing country.

India's economy grew 4.4% during April to June 2013, its weakest pace since the first quarter of 2009. Many economists expect this fiscal year's economic growth to be equal to or less than last year's decade-low pace of 5%. Prices of diesel and gasoline have climbed 10.2% each since January.

Car sales in India fell 6.7% in the year ended March 31, 2013, to 1.9 million units, the first decline in annual sales in a decade. Since December, year-over-year sales fell every month before recording an expansion in August.

In the past month, sales of cars rose 15% to 133,486 vehicles, the association said Tuesday.

That was mainly because of a more-than-twofold increase in sales at Maruti Suzuki India Ltd. from a year earlier when production was hit because of the closure of a factory. The Suzuki Motor Corp. unit, India's top car maker by sales, locked out workers at its plant at Manesar in the northern state of Haryana for several days in July 2012 and most of August after a labor problem

During April to August, or the first five months of this fiscal year, car sales in India fell 5.8% to 699,300.

The higher sales in August were "merely an aberration," Mr. Sen said. "Even with the festive season, we won't be able to recover from this negative trend."

Sales of cars, motorcycles and scooters tend to rise during the festival months when India's majority Hindus consider it auspicious to make new purchases. The South Indian festival of Onam is in September, followed by others, including the main festival of Diwali in November.

In August, sales of sport-utility vehicles declined for the second straight month—they fell 12.6% from a year earlier to 39,379 vehicles. July's 17.5% drop in SUV sales was the first decline since October 2011.

In addition to the rising price of diesel—the fuel used by most SUVs in India—demand has been affected by an increase in the prices of SUVs. Mahindra & Mahindra Ltd., Toyota Motor Corp. and other SUV manufacturers increased prices in March after the government raised the factory tax on locally produced SUVs to 30% from 27%.

Sales of medium and heavy trucks fell 44% in the past month to 11,855 vehicles. That was the biggest drop in the segment since a 61% drop in December 2008, Mr. Sen said.

The figure indicates a slowdown in infrastructure, mining and construction activity, he said.

Sale of light trucks and buses fell 14% to 35,866 vehicles.