MUMBAI (NewsRise) -- Maruti Suzuki India, the nation's top carmaker, suffered its worst fall in monthly sales in seven years, as a downturn gripping the automobile industry worsened due to a spiraling credit crisis.
The Suzuki Motor unit's total sales including exports slumped 34% on-year to 109,264 vehicles last month, the company said in a statement on Thursday. Domestic sales of Maruti's cars, minivans, and sport-utility vehicles fell more than 35% to 100,006 units, while exports slipped 9.4% to 9,258 units.
Maruti's disappointing sales underscore the mounting troubles of India's passenger vehicles industry amid a broader slowdown. Weak consumer demand caused Asia's third-largest economy to expand at the slowest pace in more than four years in January-March at 5.8%. The prolonged credit squeeze has forced carmakers such as Maruti to cut production earlier this year. A government push toward electric vehicles is further compounding the industry's troubles.
India's vehicle sales volumes expanded at the slowest pace in five years in the fiscal year ended March 31. Sales of cars, SUVs, and vans fell 2.7% to 3.38 million units in the year. Maruti has forecast production and sales to grow between 4% and 8% during the year. Last year, it had predicted a 10% sales growth, but barely managed to expand at 6.1%.
Last week, the company reported a better-than-expected first-quarter profit on the back of cost controls. The company sold 18% fewer number of vehicles in the last quarter.
Mahindra & Mahindra, maker of Scorpio SUVs and farm equipment, reported a 15% decline in total July sales at 40,142 units. Passenger vehicle sales, too, declined at a similar pace, the company said.
"The headwinds faced by the automotive industry continue as a result of subdued consumer sentiment, triggered by various factors. The industry needs stimuli to help revive consumer demand and conversions," Veejay Ram Nakra, chief of sales and marketing for the automotive division at M&M, said in a statement.
"We hope that the overall buying sentiment will improve in the run-up to the festive season and with the monsoon turning out to be better than initially anticipated," Nakra said.
According to the state weather office, monsoon rains over the next few weeks are expected to make good for the early shortfall, boosting the prospects of farmers.
On Monday, M&M's Managing Director Pawan Goenka said April-June was one of the worst quarters in terms of sales contraction seen in a long time. A stimulus for the auto sector is the need of the hour, Goenka told television channel CNBC-TV18.
The industry has long been demanding a cut in the Goods and Services Tax on car purchases to 18% from the current 28% to stimulate demand. Instead, the GST Council last week cut the tax rates on electric vehicles to 5% from 12%, while the federal budget in June offered tax incentives for buyers of EVs.
Shares of Maruti gained 1.9% in Mumbai trading on Thursday, while that of Mahindra closed 0.5% lower. The benchmark S&P BSE Sensex lost 1.2%.
--Dhanya Ann Thoppil