India's domestic car sales declined for the second month in a row in August in a sharp contrast to the year-ago period when it had emerged as the fastest growing car market in the world.
Car sales during the month slid 10.1% to under 150,000 units primarily due to market leader Maruti Suzuki's persistent labour problems at the Manesar factory, but also due to lower consumer demand on the back of rising interest rates and higher cost of fuel. During the same month in 2010, car sales had surged by over 33% that was the highest across the world.
"High interest rates continued to be a big problem for the industry and it is impacting the cost of finance for both companies and customers," said Vishnu Mathur, director general, Society of Indian Automobile Manufacturers (SIAM).
Sale of passenger vehicles which also includes utility vehicles and SUVs popular in the hinterland, was also down by 6% during the month suggesting that this time the rural markets are also feeling the pinch. During the slowdown of 2008, the Indian market was one of the few that had managed to stay affloat largely on the back of buoyancy in the rural markets.
The low sales belied any expectations of a rebound courtesy the dozen odd launches during the month and manufacturers are now banking on the festive season to bail them out.
Market leader Maruti Suzuki India Limited (MSIL) saw its sales decline by 19.2% to 63,296 units from 78,351 units reeling under the impact of labour issues at its Manesar plant, where production has been curtailed.
Others however, fared no better despite no such hindrances. Arch rival Hyundai Motors posted a 7.5% decline to 26,451 units while homegrown Tata Motors reported a 39.5% dip to just 13,508 units.