Tax and Price Hikes Slow April Auto Sales in India

But analysts expect the car market to revive this year after the central bank last month cut rates by a more-than-expected 50 basis points -- its first such step in three years -- in an effort to spur growth.

Car sales in India rose just 3.4% year-on-year in April, data from an industry body showed Thursday, after the government hiked taxes on vehicles and automakers raised prices.

Firms sold 168,351 cars in the domestic market in April, up from 162,813 in the same month last year, its sixth monthly increase, according to the Society of Indian Automobile Manufacturers.

Sales rose 20% in March.

Analysts said the recent rise in taxes and resultant hikes in the prices of vehicles has temporarily affected demand.

The broader trend shows that demand for cars is slowing, rising just 2.19% for the full year to March 31, well-down from a scorching 29% in the previous fiscal year.

The growth is its slowest in three years and was hit by high fuel prices and interest rates that made auto loans costlier.

But analysts expect the car market to revive this year after the central bank last month cut rates by a more-than-expected 50 basis points -- its first such step in three years -- in an effort to spur growth.

Global automakers from General Motors Co. (IW 500/5) to Toyota Motor Corp. (IW 1000/5) have been heading to India and neighboring China seeking to boost sales as markets in most developed countries are saturated.

Car ownership remains low in India, with just 12 out of every 1,000 Indians owning a vehicle, compared with more than 500 out of every 1,000 people in the United States, according to the Society of Indian Automobile Manufacturers.

Copyright Agence France-Presse, 2012

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