India Car Sales Poised for First Fall in Decade on Demand

India’s annual car sales are poised to decline for the first time in a decade as faster inflation, slowing economic growth and high interest rates continue to keep buyers from showrooms.

Local deliveries declined 4.6 percent to 1.71 million cars in the 11 months ended in February, according to the Society of Indian Automobile Manufacturers. Annual deliveries last declined in the year ended March 2003, the group said.

Carmakers from Suzuki Motor Corp. to Ford Motor Co. are introducing new models and variants, and offering discounts as the industry group in January lowered its full-year domestic car sales forecast for the third time in six months as demand wanes. February car sales fell 26 percent to 158,513 units, the biggest monthly drop since December 2000, the group said.

“India’s economy is not doing very well,” Sugato Sen, the deputy director general of the group, said in New Delhi today. “In such times, the discretionary purchases get hit first and small cars have been affected the most.”

The slowdown in India comes as the European auto market is set to shrink for a sixth consecutive year, according to IHS Automotive research. In contrast, China’s passenger-vehicle market had its strongest start since 2010, with wholesale deliveries rising 20 percent to 2.84 million units in January and February.

‘Bottoming Out’

Maruti Suzuki India Ltd., the local unit of Suzuki, closed one of its factories for a day last week to pare inventory. The automaker said March 1 that domestic deliveries fell 9 percent in February, led by a 16 percent drop in its mini-car sales.

Hyundai Motor Co. said on March 1 its sales in India last month fell 7.6 percent to 34,002 vehicles. Tata Motors Ltd., maker of the world’s cheapest car, the Nano, reported a 70 percent drop in passenger-vehicle sales for February to the lowest in a decade.

“We still hope we’re bottoming out and hope we’ll improve in future,” said Sen.

Asia’s third-biggest economy expanded 4.5 percent in the three months through Dec. 31 from a year earlier, the weakest pace in almost four years, a report showed Feb. 28.

The consumer-price gauge in January surged 10.79 percent, one of the highest levels in major economies. The Reserve Bank of India’s benchmark repurchase rate remains the highest among major Asian economies even after Governor Duvvuri Subbarao cut it on Jan. 29 by 25 basis points to 7.75 percent in the first reduction since April.