Car sales fall 26%, the worst in 12 yrs

New Delhi: The economic slowdown, high interest rates and costly fuel have punctured the momentum of the Indian car industry, with sales dropping 26% in February, the sharpest monthly decline in over 12 years. Commercial vehicle sales, a key barometer of economic health, fell 35% during the month, indicating that the worst may not be over yet. 

    According to numbers released by the Society of Indian Automobile Manufacturers (Siam), car sales in February 2012 fell to 1.58 lakh units, compared to 2.13 lakh units a year ago. 
    The year-on-year growth decline is the highest since the 40% fall witnessed in December 2000. Higher tax on SUVs will add to industry woes 
New Delhi: The Indian automobile industry, already saddled with high inventory levels, is worried that a revival of car sales, which plunged to a 12-year low of 26% in February, will may be difficult as overall factors do not support an immediate upturn. 
    "There is no improvement in the the market sentiment. People have more or less stopped discretionary purchases," Society of Indian Automobile Manufacturers (Siam) deputy director Sugato Sen said. "This has really impacted the bottom of the pyramid-—people who buy smaller cars," he said, referring to the slowing economy which is growing at its worst pace in over a decade. "That is getting reflected in the numbers." 
    Siam has already pulled down its car sales growth forecast for the year that ends on March 31 to 0-1%, its third downgrade this financial year from an initial estimate of 10-12%. Top functionaries have said that growth may even slip into the negative territory, and this will make it the slowest pace of growth in a decade. 
    Maruti, which saw a 9% decline in February sales, closed its Gurgaon factory for a day last week to pare inventory. Hyundai, the country's second-biggest carmaker, expects the tough times to continue. "The market was suppressed as there was a drop in enquiries with lower rates of conversions to purchase. The increase in fuel prices negatively impacted the already low market sentiments. We expect the challenge to continue in the next quarter until there is a significant change in macro-economic conditions," said Rakesh Srivastava, VP (sales and marketing) at Hyundai India. 
    Toyota, General Motors, Tata Motors and Ford also saw a contraction in volumes. Many have criticized the government decision to tax SUVs higher, saying it might further slow down the industry as it was the only category witnessing a healthy growth. "The hike in excise duty for SUVs, which is impacting other models as well, has further dampened the growth prospects," said P Balendran, VP at GM, India.