India Car Sales Forecast Cut Second Time as Demand Slows

India’s automakers’ association lowered its full-year domestic car sales forecast for the second time in four months as slowing economic growth and high interest rates keep buyers from showrooms.

The Society of Indian Automobile Manufacturers cut its car sales growth forecast to as low as 1 percent, S. Sandilya, the president of the industry group, said in New Delhi today. Car sales increased 0.2 percent in the year ended March 2009, according to the group. The annual forecast for growth in local car sales was cut to as low as 9 percent in July, from an earlier estimate of 10 percent-12 percent pace given in April.

The forecast underscores the challenge carmakers from Suzuki Motor Corp. (7269) to Toyota Motor Corp. (7203) will face to win customers in Asia’s third-biggest auto market. New models and variants are being introduced and discounts offered as automakers seek to spur sales in the festive season under way as high gasoline prices and borrowing costs discourage buyers.

“Inflation is not under control and the cost of vehicle ownership is high,” said Sandilya. “Economic growth is also not encouraging.”

Shares of Maruti Suzuki India Ltd. (MSIL) declined as much as 1.1 percent and traded at 1,384.10 rupees, or down 0.6 percent, as of 11:45 a.m. in Mumbai. Mahindra & Mahindra Ltd. (MM) declined 1.4 percent to 857.25 rupees. Tata Motors Ltd. (TTMT) fell 0.1 percent to 269.40 rupees. The benchmark Sensitive Index fell 0.7 percent.

September Sales

Local deliveries in September fell 5.4 percent to 157,536 cars, the second consecutive monthly decline, the group said.

The slowdown in India comes as the European debt crisis dragged the region’s auto market to its lowest level in 17 years. China’s state-backed auto association will release monthly sales data today.

Domestic sales of Maruti, the local unit of Suzuki, was unchanged in the six months ended Sept. 30 from a year earlier.

Hyundai Motor Co. (005380) said on Oct. 1 its Indian sales last month fell 14 percent to 30,851 vehicles. Tata Motors, maker of the world’s cheapest car, the Nano, reported an 18 percent drop in passenger-vehicle sales for September, while Toyota’s India sales declined 5.4 percent.

Car demand has been hurt by high gasoline prices and borrowing costs in a country where almost 80 percent of auto purchases are funded through loans.

The International Monetary Fund yesterday cut its 2012 expansion forecast for Asia’s third-largest economy to 4.9 percent, the slowest pace in a decade, from 6.1 percent in July.

India’s central bank raised interest rates a record 13 times from March 2010 to October last year to rein in inflation. Headline inflation accelerated to 7.55 percent in August, the fastest pace in the BRIC group of largest emerging nations that also includes Brazil, Russia and China.

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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