Indian car sales dip most in 5 years

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(Agencies)
Updated: 2008-12-11 07:59

India's passenger-car sales declined 19 percent last month, the most in more than five years, as tighter lending by banks and a slowing economy hurt demand.

Sales fell to 83,059 from 103,031 a year earlier, the Society of Indian Automobile Manufacturers said in a statement in New Delhi yesterday. That's the biggest drop since a 31 percent decline in February 2003, according to Bloomberg data. The total sales were the lowest level in two years.

Demand in Asia's fourth-largest automotive market has fallen in four of the past five months as banks cut back on automotive loans and the wider economic slowdown kept consumers away from showrooms. Maruti Suzuki India Ltd, the nation's biggest carmaker, and its rivals have cut prices to revive demand as the government slashed taxes to stimulate the economy.

"The question remains as to whether these measures will bring back growth," said Gaurav Lohia, a Mumbai-based analyst at K.R. Choksey Shares & Securities Pvt. "The contraction in consumer confidence is so high that I don't see any spurt in demand in the short term."

India's government plans to spend an extra 200 billion rupees ($4 billion) to support an economy buffeted by a slowdown and a terrorist attack, following the interest-rate cuts announced last week. Prime Minister Manmohan Singh expects the economy to slow to as much as 7 percent in the year to March 31, the weakest pace since 2003.

To boost growth, the government also cut a 4 percent value added tax on vehicles. The Reserve Bank of India cut interest rates for the third time in less than two months on Dec 6 while the government reduced fuel prices by as much as 10 percent a day earlier.

"Banks must cut their rates and start lending more," said Dilip Chenoy, director general of the automakers group. Banks are lending to car buyers now at 16 percent compared with 9 percent years ago, he said.