India's Automakers Post Lackluster Sales in May

India's top automakers reported lackluster sales in May, as high taxes and rising fuel prices produced more downbeat data on the national economy.

Maruti Suzuki and Ford Motor Co. (IW 1000/16) both posted a fall in sales by their Indian operations, while Tata Motors Ltd. (IW 1000/185) sales edged up marginally.

The weak figures came after official data released Thursday for the January-March quarter showed that India's economy grew at its slowest pace in nearly a decade.

Maruti Suzuki India, majority-owned by Japan's Suzuki Motor Corp. (IW 1000/136), said passenger-car sales fell 5% year-on-year to 98,884 vehicles, snapping four straight months of gains, after demand had slowed last year.

Maruti's small cars -- the M800, Alto, A-star and WagonR -- and the midsize SX4 all showed lower sales.

Ford India sold 6,036 units in May, down 14% year-on-year, in what it said were "increasingly challenging market conditions."

Tata Motors' car sales rose to 20,503 vehicles, up 6% year-over-year.

Maruti's sales also are slowing as its portfolio of cars -- mainly petrol versions -- are not selling as fast as diesel-powered cars in India.

Diesel fuel, widely used to transport goods and services across India, is priced about 40% cheaper than petrol.

While petrol prices have been deregulated, the government has kept diesel at below-market prices.

Last week, Indian state-run oil firms announced the sharpest jump in petrol prices in nearly a decade to offset growing losses caused by subsidized rates.

India, which has been one of the world's fastest-growing car markets in recent years, suffered a slowdown in demand in 2011 as many buyers decided to defer purchases due to costly loans and rising fuel expenses.

Analysts have forecast that car sales in India will improve in the coming months after the central Reserve Bank of India lowered interest rates by a sharper-than-expected 50 basis points in April.

The Society of Automobile Manufacturers forecasts that car sales will grow 10% to 12% in the new financial year, which ends March 2013.

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