Interest rates, fuel hikes dampen automobile sales in May: SIAM

According to SIAM, passenger car sales stood at 158,817 units last month against 148,425 units in May, 2010. "The slowdown in sales growth to only seven percent is due to several factors like interest rates, fuel price and input cost hikes which have dented the momentum of sales," senior SIAM official told IANS.

The automobile industry in May 2010, had clocked an impressive 30.41 percent growth in car sales, which stood at 148,425 units, against 113,810 units sold in May, 2009. Auto loans have been getting expensive as banks have largely passed on the effects of successive rate hikes by the RBI. The central bank raised key interest rates nine times in the past 14 months. Also, prices of essential inputs like rubber, steel and other metals also have been on an uptrend.

Sales of petrol-run cars were also depressed after the prices of the fuel shot up signifanctly. The sale of diesel cars has been robust but manufacturers are unable to keep up with the soaring demand with consumers waiting for anywhere between one to six months for various models.

According to the SIAM report, the two-wheeler segment also reported a slower sales growth of 14.49 percent last month and stood at 10,72,287 units from 9,36,555 units in May 2009. "If we compare May 2011 to May 2010, the growth figures for three- and two-wheelers are also lower at 8.60 percent and 14.49 percent. The sales in May 2010 over May 2009 were growing at 28.66 percent and 10.35 percent respectively," the official said.

The three-wheeler segment grew by 8.60 percent in May as compared to the corresponding period last year.  Earlier, Indian car market leader Maruti Suzuki reported a marginal 1.9 percent increase for May with 104,073 units sold compared to 102,175 in the corresponding period of 2010.

"I feel the slowdown is temporary and a short-term one. Our projection of a sales increase of 12-13 percent for this fiscal would be achieved," Shashank Shrivastava, chief general manager, marketing, Maruti Suzuki told IANS. Hyundai Motors, which reported a marginal sales growth of two percent in May, expected to see a slow increase in sales for the April-June first quarter of the currrent fiscal.

GM India vice president P. Balendran felt that the car market would remain depressed in terms of sales for the coming months. "Given the hikes (interest rates, fuel prices, commodity prices, inflation), we expect the market to remain depressed in the coming months as well," Balendran said, adding that even enquiries at the company's showrooms have come down.