Car sales in India slid by 24% in the Diwali month of October — the slowest in a decade — as the government stared at a worrying prospect: controlling prices may have affected demand, which has spurred India’s growth story.
Car sales have now dropped for four consecutive months.
"The market continues to remain very challenging as interest rates and rising fuel costs have led to consumers postponing their purchasing decisions. Only new launches and diesel cars are witnessing any demand and for existing models it is a very difficult time," said Arvind Saxena, director of sales and marketing, Hyundai Motor India Ltd.
The latest car sales data came on a day when global ratings firm Moody's downgraded the outlook of the Indian banking system to negative. Moody’s said slowing economic growth could dent the asset quality and profitability of the Indian banking sector.
It's not just the auto sector where sales have slowed down.Latest bank data mirror strong warnings on a consumer spending slowdown across sectors. Consumer durable loans have contracted by 16.4% from April to September, 2011, compared to 9.5% in that period last year, implying that people are putting off purchases of goods such as refrigerators, televisions and microwave ovens because of high prices and rising interest rates.
The growth of vehicle loans has also decelerated to 5.9% during the first half of the current fiscal, compared to a growth of 10.3% last year.
Sales slowed down due to lower consumer demand on the back of rising interest rates and higher fuel costs.
Last month, the Reserve Bank of India (RBI) raised interest rates for the 13th time in the past 19 months to stymie demand and cool prices.