High interest rates, fuel prices hit car sales in May

Last Updated: Sat, Jun 02, 2012 05:57 hrs

Passenger vehicle sales in the domestic market continued to remain weak in May, with major auto manufacturers reporting either a decline or marginal growth in volumes.

If the latest figures are anything to go by, low consumer sentiment, high interest rates and rising petrol prices are hitting hard the auto industry in India, which until recently was touted as one of the fastest growing markets globally.

Market leader Maruti Suzuki India, which posted growth in sales in the first four months of the year, saw its volumes decline 4.3 per cent to 89,478 units in May.

Sales tanked by as much as 29 per cent in the compact car segment on the back of weak demand for Alto, M800, A-Star and WagonR, all petrol variants.

The price difference between petrol and diesel is over Rs 32 per litre, which is leading an increasing number of consumers to opt for diesel vehicles.

Ford India, the Indian arm of US car maker Ford Motor Co, said its sales declined by 14 per cent to 6,036 units in May, while volumes at General Motors India fell by 27 per cent to 6,079 units.

"We are working to offer more diesel vehicles to keep up with increased demand. We have increased capacity at our Chennai engine plant to 340,000 engines with an investment of $ 72 million (around Rs 403 crore) that will be commissioned very soon," said Michael Boneham, president and managing director, Ford India.

The country's second largest car maker, Hyundai Motor India Ltd (HMIL), managed to grow volumes marginally by 2.8 per cent. "The recent rise in petrol prices has depressed market sentiment, with the macroeconomic indicators providing no cause for cheer. The demand outlook doesn't look very bright", said Arvind Saxena, director, (marketing and sales), HMIL.

Passenger vehicle sales at Tata Motors Ltd rose six per cent in May to 20,503 units, lifted by strong demand for mini car Nano. Sale of Tata's Indica hatchback fell one per cent to 5,467 units, and that of sedan Indigo dropped by a fifth to 3,397 units. Sales of Nano, the world's cheapest car, increased 31 per cent to 8,507 units.

Utility vehicle maker Mahindra and Mahindra Ltd, which has a strong portfolio of diesel vehicles, grew volumes by 27 per cent to 21,154 units during the month.

Interestingly, Honda Siel Cars India Ltd, which peddles only petrol cars, increased sales three-fold on robust demand for small cars Brio and Jazz. Honda Siel, which is mostly known for its flagship sedan City, registered a growth of over 63 per cent in its volumes.

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