Auto sector growth could slow to 14-15% in 2011

An upward spiral in interest rates amid rising fuel prices and input costs has the potential to slow down the growth of the the Indian auto sector to around 14-15% in 2011 from 31% in 2010, a top industry official has said.

The industry had registered 23-24% growth in 2009, despite the global economic slowdown.

"High input costs and rising fuel prices, coupled with a steady hike in interest rates, will affect sales this year for the overall industry. However, we (GM) don't expect any contraction," General Motors India Vice-President, Corporate Affairs, A Balendran told PTI here.

GM India's sales grew by a mere 6% in January this year to 9,984 units from 9,421 units in the same month last year. It expects to chart similar sales in February as well, Balendran said.

"Market sentiment is very low at this point. There are issues like the economic slowdown, (tight) liquidity and inflation. These are not very good signs for the auto industry. It would make products costlier," he said.

Crude oil prices have touched $ 100 per barrel, thus making petrol dearer for consumers, Balendran said, adding that prices are expected to rise further.

The country's largest car-maker, Maruti Suzuki, had recently said it fears a drop in demand for the auto sector in FY'12 due to factors like high inflation, rate hikes and high fuel prices.

"Things like high inflation, the rate hikes and the fuel price increase point out to a tightening in the situation... We need to be wary and careful as the buoyancy we saw till now will definitely slow down a bit," Maruti Suzuki Chief General Manager, Marketing, Shashank Srivastava had told PTI earlier this month.

Srivastava, however, did not offer any estimate on industry growth.