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Automobile sales lose momentum...

autos Updated: Jun 02, 2011 03:09 IST
HT Correspondent

A culmination of rising interest rates and higher cost of fuel led to a slowdown in demand for cars for a second straight month in May as bearish sentiments and higher loan installments forced consumers to defer purchases.

Auto sales growth year-on-year in May was roughly 5%, compared with a blockbuster 35% a year ago.

At the heart of this slowdown are the big three of the Indian car industry — Maruti, Hyundai and Tata — who suffered in varying intensities. While the absolute number of buyers was still higher, the influx of new buyers was markedly lower than what it was last year in May. Barring Skoda, every company saw its sales growth rate come down from the one achieved last year.

Hyundai fared the best among the three with an over 14% growth that compares favourably with its 15.5% growth in May last year. But its growth last month was largely due to the launch of its new mid size sedan Verna, that has already clocked over 12,000 bookings.

Maruti managed to stay affloat with a near 4% growth, a sharp climb down from the 27% growth in the previous year. Tata Motors suffered the most with sales declining by 9% including that of Nano whose sales came down from the over 10,000 units it had sold in April to 6,515 units last month.

"Hike in prices of fuel often have a temporary shock value but the impact of higher interest rates is more prolonged," said Mayank Pareek, managing executive officer (sales and marketing), Maruti Suzuki India Ltd. "Over a quarter of car buyers already have an existing home loan and are hence stretched."

Sales growth is expected to remain in low single digit at least for the next 3 months till the festive season when purchasing generally hits a higher gear.

“The market has slowed down considerably after the first quarter of the year because of increasing interest rates and rising fuel prices among other factors,” said Arvind Saxena, director, marketing and sales, Hyundai Motor India Ltd.