India Car Sales Grow Slowest Since 2009 as Borrowing Costs Rise

India’s June car sales grew the slowest since March 2009 as rising interest rates and fuel costs dented demand and a strike at Maruti Suzuki India Ltd. (MSIL) disrupted supply.

Sales rose 1.6 percent to 143,370 cars last month, compared with 141,086 a year earlier, according to data the Society of Indian Automobile Manufacturers released today.

The Reserve Bank of India has raised interest rates 1.25 percentage points this year to rein in inflation, driving down demand for cars in a country where about 80 percent of purchases are funded by loans. The manufacturers’ group today cut its growth forecast to 10 percent to 12 percent for the year ending March 31, 2012, from an earlier estimate for 16 percent to 18 percent.

“We are perhaps sitting at a threshold where if the financing rates goes up any further it’ll have a devastating effect on the industry,” Pawan Goenka, president of the society, said in New Delhi. “The increase in vehicle financing rates has been higher than what we had anticipated three months ago.”

Maruti Suzuki, maker of almost half the cars in India, said on July 1 that it sold fewer vehicles in June than a year earlier, the first monthly decline since December 2008.

Maruti Strike

Workers ended an 11-day strike at Maruti’s Manesar plant near New Delhi on June 17, after the Indian unit of Suzuki Motor Corp. (7269) agreed to take back dismissed employees. The strike at the factory, which builds as many as 1,200 cars daily, cost Maruti $9 million a day, Chairman R.C. Bhargava said on June 8.

In May, state-owned Indian Oil Corp., the country’s largest refiner, increased the price of gasoline by the most since June 2008.

Sales at Tata Motors Ltd. (TTMT), the Indian owner of Jaguar and Land Rover, declined 1 percent to 66,358 units in June from a year earlier, the company said in a statement July 1.

Deliveries of trucks and buses increased 18 percent to 62,009 in June, according to the society. Two-wheeler sales climbed 15 percent to 1.07 million.

Maruti fell 1.5 percent to 1,167 rupees as of 10:50 a.m. in Mumbai, compared with a 0.3 percent decline in the benchmark Sensitive Index.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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