August Car Sales Slide 10.1% in India

MUMBAI – High interest rates, rising material and fuel costs and tighter liquidity are denting light-vehicle sales in India.

Auto makers are trying to shake up the dormant market with new launches. Six models were introduced in August and another set of new passenger cars awaits consumers in September.

Ford deliveries fell 7.2%.

August car sales tumbled 10.1% to 144,516 units, compared with year-ago, according to WardsAuto data.

The decline was less than July’s 15.8% drop in deliveries, but it belied auto makers’ hopes for significant growth at the start of the annual 4-month-long festival season.

"Production has also been affected, with large players not able to churn out optimum production in August," says Vishnu Mathur, director-general of the Society of Indian Automobile Manufacturers.

India’s Big Three auto makers lost a combined 25.1%, or 103,255 units, in domestic sales last month: Tata 30.5%, Maruti Suzuki 19.2% and Hyundai India 7.5%. Additionally, Ford, which had been doing well with its made-for-India Figo, saw deliveries fall 7.2%.

But other auto makers did well in August, with General Motors, Toyota Kirloskar and Honda Siel Cars all posting increases. Sales of luxury cars also continued to prosper.

The best-selling segment in the month was light trucks, which includes multi-utility vehicles, SUVs and vans, up a total 19.5%, according to WardsAuto data. Mahindra & Mahindra led the growth with a 28.5% gain to 27,469 units.

Another factor hurting sales is the soaring yen, which is affecting Japanese auto makers here. Increasing raw-material costs are forcing the manufacturers to consider increasing prices 1.5% to 2%.

The vicious cycle that results already is taking its toll. Auto makers hike their retail prices and then as sales fall or the competition increases, they offer steep discounts. Last month, Honda cut prices of the Jazz hatchback and City sedan by Rs45,000-Rs175,000 ($1,000-$3,900).

Sales of Tata’s low-cost Nano small car continue to disappoint. Seeing an opportunity, Maruti Suzuki now plans to bring back its entry-level 800, based on the Japanese auto maker’s best-selling Alto.

Auto makers here also are hurrying to launch new fuel-efficient diesel cars, with diesel fuel prices currently 30% lower than gasoline. However, the government’s indecision on a pricing policy for diesel fuel is discouraging some manufacturers’ investment plans by.

Maruti Suzuki, for example, has put an expansion of its diesel-engine plant on hold until the government makes up its mind. Plans are to spend RS3.5 billion ($78 million) to boost capacity by 100,000 units for a total 390,000 engines annually.

Says Chairman R.C. Bhargava: “We do not know what to do.”