Car sales head for first annual fall in 10 years

Annual car sales are likely to drop for the first time since 2002 in the year ending March after January sales fell short of expectations, an industry body said.

Car sales, which grew 30 per cent in the year ending March 2011, posted their first monthly fall in three years last July, as high financing and running costs deterred buyers. "The car industry is too sensitive to interest rates, and we don't see interest rates coming down quickly," Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers (Siam), told reporters.

"Unless sales grow in February-March at 10 to 12 per cent, which is unlikely, the industry will miss the sales projection," he said, referring to its forecast for zero to 2 per cent growth.

Indian car sales have risen every year since the fiscal year that ended in March 2002, according to Siam data.

Car sales rose 7.2 per cent in January from a year earlier, the third consecutive monthly rise, but less than required for automakers to make up for record sales falls in late 2011. Sales rose in November and December, offering encouragement to an industry that had experienced four consecutive months of falling sales.

Siam expects vehicle sales to increase by 11-13 per cent in the fiscal year starting on April 1 if the Reserve Bank begins to ease interest rates soon. The central bank has raised interest rates 13 times since March 2010 in its battle against stubborn inflation.