Bloomberg News

Indian Automakers Cut Car Sales Forecast for 2nd Time on Rates

October 10, 2011

Oct. 10 (Bloomberg) -- India’s automakers cut car sales growth forecast for a second time this year after deliveries dropped for a third straight month as higher borrowing costs reduced demand for Honda Motor Co. and Ford Motor Co. vehicles.

The Society of Indian Automobile Manufacturers lowered its growth forecast to as low as 2 percent in the year ending March 31, S. Sandilya, president of the industry group, said in New Delhi today. In July, the Society said it expected sales to rise 10 percent to 12 percent.

Automakers expect sales to rise at the slowest pace in three years after interest rate increases slashed demand in Asia’s third-largest car market. The slowdown may prompt companies to offer discounts to lure customers, affecting profit margins, according to Umesh Karne, a Mumbai-based analyst.

“We may see big discounts in the passenger car market in the next two months,” Karne, an analyst with Brics Securities Ltd. said. “November and December are slow months” as demand cools after the Hindu festival of Diwali this month, he said.

Industrywide car sales fell 1.8 percent to 165,925 in September, the group said. Production cuts because of a workers’ strike at Maruti Suzuki India Ltd., the nation’s biggest carmaker, also caused sales to fall. The strike at Maruti’s Manesar plant near New Delhi resumed Oct. 7 after the company said earlier this month that it resolved the labor dispute.

Trucks, Buses

In April, the industry group had forecast a sales growth of as much as 18 percent this year. Sales had expanded 30 percent, the biggest gain in at least nine years, in the previous 12 months.

The Reserve Bank of India has raised interest rates 12 times since mid-March 2010 to rein in inflation, driving down demand for cars in a country where about 80 percent of purchases are funded by loans.

Industrywide sales of trucks and buses rose 18 percent to 70,634 in September, the highest since March, according to the group. Two-wheeler sales grew to 1.23 million units, up from 992,383 a year earlier.

Tata Motors Ltd., India’s biggest truckmaker, surged 7.3 percent in Mumbai to 170.75 rupees, the highest since Aug. 5. Maruti fell 3.8 percent, the most in almost seven months, to 1,070.95 rupees.

Car sales in the country in the first half of the year fell 1.4 percent to 909,283, according to data from the industry group.

--Editors: Arijit Ghosh, Vipin Nair

To contact the reporter on this story: 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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