AGENCE FRANCE PRESSE
Published — Wednesday 9 January 2013
Last update 10 January 2013 1:07 am
MUMBAI: India's auto industry yesterday lowered its annual growth forecast for car sales for the third time this fiscal year, as a slowing economy and costlier loans keep buyers away from showrooms.
The Society of Indian Automobile Manufacturers (SIAM) now predicts sales of between zero and 1.0 percent, down from 1.0 to 3.0 percent, spelling bad news for global carmakers seeking to expand beyond stagnant Western markets.
"Our earlier forecast of up to 3.0 percent growth appears too distant. The overall sentiment is very weak," said SIAM's Deputy Director General Sugato Sen.
The New Delhi-based group said domestic car sales in December fell 12.5 percent to 141,083 units from a year earlier.
If SIAM's new forecast for the fiscal year to March 2013 proves accurate, it means growth will be the weakest since fiscal 2001-2002, when car sales rose by just 0.5 percent, analysts said.
Demand for cars in India has been weakening due to rising fuel prices, high interest rates and a slowing economy. Automakers are introducing new models and variants and offering discounts to woo customers.
Sen said the scenario could improve if taxes on automobiles were reduced and inflation and interest rates started to ease.
Car sales rose between 2004 and 2011, with a jump over the fiscal year 2010-2011 of 30 percent to 1.98 million units, as an increasingly affluent middle class snapped up new models with the help of cheap loans.
Global auto makers such as Ford, General Motors and Nissan have invested millions of dollars in the past few years in India to capitalize on this growth market and use the country as a global manufacturing base.
"The economy is stuck in a slow lane, which has hit demand," said Mahantesh Sabarad, auto analyst with Fortune Equity Brokers.