Second year of falling car sales on tap for India

Sales have fallen 4.7% in first six months, said SIAM

Car sales have fallen 4.7% in the first six months of the fiscal year, the sharpest decline in half-year sales since 2002-2003, according to figures released by the Society of Indian Automobile Manufacturers (SIAM).

Despite a slight 0.7% uptick in sales in September when automakers sold 156,018 cars, the industry is facing a second consecutive year of falling demand as high interest rates and fuel costs keep a lid on consumer spending in a slowing economy.

A surprise increase in interest rates and higher prices last month are tempering hopes for a turnaround in the country's struggling auto sector and some analysts have pushed back forecasts for a sustained recovery to the next financial year.

"Whether we'll catch up...it's a tough call," said Vikram Kirloskar, president of the Society of Indian Automobile Manufacturers (SIAM). "I'll be thrilled if it is flat or a little bit plus."

Automakers are hoping for a slight recovery in demand thanks to a strong monsoon which should raise incomes, while some car launches, including that of Ford Motor Co's EcoSport compact sport-utility vehicle, are seeing strong sales.

Sales of motorcycles rose 17.4% in September to 885,117, while truck and bus sales were down 27% at 51,680 units, SIAM said. Sales of commercial vehicles have been particularly hit hard as industrial production and economic activity slows.

The association last month said car sales were likely to be negative in the current financial year that ends in March 2014 after earlier forecasting growth of 3-5%.