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India Car Sales See Biggest Drop in 12 Years

March 11, 2013
Car sales in India's once-booming passenger market plunged nearly 26% in February.

NEW DELHI -- Car sales in India's once-booming passenger market plunged nearly 26% in February, the biggest dive in 12 years, industry figures showed Monday, as a sharply slowing economy discouraged buyers.

Analysts said the slide was far worse than expected and the Society of Indian Automobile Manufacturers (SIAM) said car sales were headed for their first full-year fall in a decade after initially projecting growth of 10% to 12%.

"Discretionary spending on cars has pretty well come to a stop with the economy slowing -- if people don't need a car, they are holding back," said SIAM deputy director general Sugato Sen.

Passenger car sales, seen as an important guide to overall economic vitality, tumbled by 25.7% to 158,513 units in February from the same month in 2012, industry body SIAM reported.

Annual figures are expected to shrink for the first time since 2002-03 with sales down by 4.7% from April to February, SIAM said.

"The weak economy, high inflation and high finance costs mean people at the bottom of the pyramid who buy smaller cars, which are the biggest part of the market, are not buying," said Sen.

Passenger car sales grew by 20% to 30% annually in the decade until 2010-11, prompting foreign automakers to invest in India to boost sales globally.

But the weakening economy and high interest rates to combat high inflation have weighed on demand. The economy is forecast to grow by just five percent this year, its weakest rate in a decade.

The fall in passenger car sales was the biggest since a 40 percent slide in December 2000, SIAM said, and came as sales in China, the world's largest car market, have been seen gaining traction.

"These (February) numbers are bad -- much worse than we expected," said Mahantesh Sabarad, analyst at Mumbai's Fortune Equity Brokers.

The sales slowdown in India, the sixth-largest passenger car market worldwide, could last many months and possibly until after the next general election, which must be held by May 2014, analysts said.

"We don't see anything on the horizon to lift sentiment. People are waiting for the economy to stabilise," Deepesh Rathore, India-based expert for research consultancy IHS Automotive told AFP.

Companies have been offering big discounts but have been unable to reverse the tailspin. Most firms posted sales falls in February but Tata Motors, which makes the world's cheapest car, the Nano, suffered most with sales down 70%.

Total bus and truck sales -- another important economic barometer -- slumped by 35% in India in February. Even sales of motorcycles -- the most popular form of personal transport -- fell 4%.

Longer term, analysts say there is still big potential in the Indian market where ownership levels remain low.

-Penny MacRae, AFP

Copyright Agence France-Presse, 2013

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