NEW DELHI (NewsRise) -- Passenger vehicle sales in India registered the steepest decline in about eight years in April as tighter availability of credit in a slowing economy damped demand.
Automotive demand in Asia's third-largest economy has been cooling since July amid a credit crunch and distress in rural markets. Automakers including Maruti Suzuki India have curtailed production in the wake of the persisting weaker sales. Most of the vehicle purchases in India are funded by loans.
Sales of passenger cars fell by 20% on-year to 160,279 units in April, the Society of Indian Automobile Manufacturers, or SIAM, said in a statement on Monday. SUVs recorded a 6.7% decrease in sales to 73,854 units last month, while commercial vehicles sales declined by about 6%. SIAM's automobile sales are counted as factory dispatches and not retail sales.
Last month, the group predicted sales to pick up in the current fiscal year, betting that the two recent interest rate cuts by the nation's central bank would spur consumer spending. In the previous financial year ended March 31, passenger vehicle sales grew at the slowest pace in five years.
According to SIAM, passenger vehicle sales will likely grow 3% to 5% this fiscal year.
"There is pent-up demand and predictions of a good monsoon. So we expect better production and sales in the second half of the (financial) year," Vishnu Mathur, the director general of SIAM, told reporters in New Delhi.
Last week, Maruti Suzuki reported its worst sales drop in seven years with total sales including exports slumping more than 17% in April. Maruti has forecast production and sales to grow between 4% and 8% this year. Last year, it had predicted a 10% sales growth, but barely managed to grow 6.1%.
Most analysts expect sales of automobiles to pick up after India's federal election culminates on May 23. Given the high base, volume growth of key automakers is likely to be suppressed till June, with a pick-up expected from the second quarter, ICICI Direct Research said in a report earlier this month.
Domestic sales of trucks and buses, considered a barometer of the economy's health, decreased 13.5% to 24,725 units in April. Sales of two-wheelers fell 16.3% to about 1.6 million units, the SIAM data showed. SIAM expects sales of two-wheelers to grow 5% to 7% this fiscal year.