MUMBAI (NewsRise) -- Passenger vehicle sales in India dropped for the third straight month in September amid rising fuel prices, but the nation's main automotive group expects festive cheer and rural demand to brighten the outlook for the rest of the fiscal year.
Sales of passenger vehicles, including cars, sport-utility vehicles, and vans fell 5.6% year-on-year to 292,658 units last month, according to data from Society of Indian Automobile Manufacturers, or SIAM.
Retail prices of gasoline and diesel in India hit record highs last week, after crude oil prices jumped to four-year highs.
Fuel prices "can be one very big challenge that can derail growth. It impacts inflation and consequently the demand slows down," Rajan Wadhera, president of SIAM, told reporters at a news conference.
"But our overall estimate is that for the next six months, the growth story of automotive sector will continue, and that will be based on good rural demand and festive season." SIAM expects the upcoming festival season to lift demand and maintained its sales growth outlook for the full fiscal year between 9% and 10%.
Rural demand is set to rise thanks to the reasonably good distribution of monsoon rains and the government's focus on improving farm income and loan waivers, especially ahead of upcoming elections.
Sales in September were also marred by a weak start to the Hindu festival season and a shift in the festive period inventory push to October this year from September and October last year, Kotak Institutional Equities said in a report last week. Automakers usually witness a surge demand during the festivals when consumers spend on everything from electronics to jewelry to cars.
Sales of SUVs recorded an 8.3% drop to 77,378 units last month, as demand for models such as Maruti Suzuki India's Vitara Brezza, Jeep's Compass, and Hyundai Motor's Creta continued to shrink. Car sales fell 5.6% to 197,124 units. Automobile sales in India are counted as factory dispatches and not retail sales.
Maruti Suzuki, the nation's largest carmaker, suffered its third consecutive monthly sales decline in September. Second-ranked Hyundai Motor saw domestic sales decline 4.5% in the month.
Mahindra & Mahindra, India's second-largest SUV maker, reported a 16% decline in domestic sales of SUVs, cars, and vans.
Domestic sale of trucks and buses, considered a barometer of the economy's health, rose more than 24% to 95,867 units in September. Sales of two-wheelers increased 4.1% to about 2.1 million units, the SIAM data showed.
-- Dhanya Ann Thoppil and Shivangi Acharya