MUMBAI (NewsRise) -- Passenger vehicle sales in India barely grew in October, after higher fuel prices and interest rates cast a pall over festival demand, damping the best annual sales period for companies from Maruti Suzuki India to Honda Motor.
Sales of passenger vehicles, including cars, sport-utility vehicles, and vans grew 1.6% year-on-year to 284,224 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 month after crude oil prices jumped to four-year highs. The rising fuel price and tighter interest rates ahead of the festival season dented consumer sentiment in Asia's third-largest economy, stirring fears of a growth slowdown.
Moreover, automotive sales in India dropped over the past three months against the high base in the year-earlier period, when India rolled out a nationwide Goods and Services Tax which resulted in lower levies on most models. The lingering effect of floods in the southern Indian state of Kerala in August has compounded the industry's problems.
Last week, Maruti Suzuki India, the country's largest carmaker, said vehicle sales barely edged up 0.2% in October. Mahindra & Mahindra, India's second-largest SUV maker, saw sales of SUVs, cars, and vans growing just 3%. Honda Cars India, the local unit of Japan's Honda Motor, saw sales stagnate in the month.
"For the four-wheeler segment, consumer sentiment continues to remain weak, with all-time high consumer (discount) offers in the festive season also being unable to spur up the demand," Mumbai-based Prabhudas Lilladhar said in a note last week. Automakers usually witness a surge in demand during the festivals when consumers spend on everything from electronics to jewelry to cars.
The brokerage said it doesn't expect "any significant volume growth" over the next few months. Last week, Nomura cut its outlook for sales growth this fiscal year ending March to 5% from 13% set at the start of the period.
However, SIAM is hopeful of a rebound when the full effect of the festival demand reflects in November sales.
The decline in the last three months was due to the high base effect, Vishnu Mathur, director general of SIAM, told reporters at a news conference in New Delhi.
"There was subdued sentiment due to exchange rate fluctuation, fuel prices, and increase in insurance premium," Mathur said. "We expect sentiments to improve from here."
SIAM expects sales of passenger vehicles to grow 7% to 9% for the full fiscal year ending 31 March.
Sales of SUVs recorded a 3.9% increase to 82,414 units last month, aided by the rebounding demand for models such as Maruti Suzuki's Vitara Brezza, Jeep's Compass, and Hyundai Motor's Creta. But car sales barely grew 0.4% to 185,400 units. Automobile sales in India are counted as factory dispatches and not retail sales.
Domestic sale of trucks and buses, considered a barometer of the economy's health, jumped 25% to 87,147 units in October. Sales of two-wheelers increased more than 17% to about 2.1 million units, the SIAM data showed.
-- Dhanya Ann Thoppil