India Passenger Vehicle Sales Poised for First Drop Since 2002

India’s automakers’ body forecast the first annual drop in passenger vehicle sales in more than a decade as an economic slowdown damps demand for cars and SUVs.

Local deliveries of cars, including sport-utility vehicles and vans, may decline this year for the first time since the 12 months ended March 2002, the Society of Indian Automobile Manufacturers said at a news conference yesterday. The group had in April forecast a 5 percent to 7 percent increase.

“Negative sentiment is a major factor for the slowdown in the auto sector,” Sugato Sen, the deputy director general of the industry body, said in a phone interview from New Delhi. “The economic downturn, along with high interest rates, high inflation and high fuel costs are keeping buyers away. We don’t expect a turnaround for at least the next two quarters.”

The industry body cut its car sales projection three times in the last financial year after initially forecasting a jump of as much as 12 percent. Car sales fell 6.7 percent to 1.9 million units in the 12 months through March, the biggest decline since 2001, as slowing economic growth and high interest rates kept buyers from showrooms, according to the manufacturers’ group.

India’s economy expanded 4.4 percent last quarter from a year earlier, the weakest pace since 2009, as investment fell and consumer spending in the nation of 1.2 billion people moderated. Consumer prices rose 9.64 percent in July from a year earlier, a report showed Aug. 12. That’s the second fastest pace of price gains in the Group of 20 major economies, according to data compiled by Bloomberg.

Mahindra Layoffs

Maruti Suzuki India Ltd. (MSIL), India’s biggest carmaker, doesn’t expect demand to pick up because of the economic slowdown, Chairman R.C. Bhargava said in an interview on Sept. 3. Growth in Asia’s third-largest economy is forecast by BNP Paribas SA to slow to 3.7 percent in the year ending March.

Local deliveries at Tata Motors Ltd. (TTMT), India’s biggest automaker by revenue, fell 34 percent in August, and the group’s car sales in India almost halved to 44,780 in the first five months of the year that began April 1.

Deliveries of utility vehicles, which increased 52 percent in the 12 months ended March, have declined 3.1 percent this year. Mahindra & Mahindra Ltd. (MM), the country’s biggest maker of sport utility vehicles, said last month that it had laid off 1,000 contract workers as sales for its models, including the XUV500 and Xylo SUVs, fell 25 percent in August to 18,137 units.

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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