NEW DELHI (Dow Jones)--Local car sales in India grew at their slowest pace in nearly two years in April as higher loan rates as well as rising fuel prices forced people to put off purchases.
Also, several auto makers raised vehicle prices over the past few months to offset an increase in the cost of steel and other commodities.
All these factors led to the lowest percentage gain since June 2009 as car sales edged up 13% in April to 162,825 autos from 143,862 a year earlier, showed data issued Monday by the Society of Indian Automobile Manufacturers.
This is the lowest percentage rise since an 8.2% growth in June 2009, said Sugato Sen, a senior director at the automobile industry lobby group.
Car sales in India climbed 30% in the financial year ended March 31, the biggest increase since 1999-2000, as customers benefited from easier availability of low-cost loans, the introduction of new models as well as rising incomes in an expanding economy.
But a spate of interest rate increases by the central bank to control spiralling inflation, and a spurt in commodity costs resulting in higher vehicle prices, have since led customers to hold on to purchases of new cars, commercial vehicles and motorcycles.
"In line with our expectations, automobile sales have already begun to slow down," Sachin Gupta and Chetan Vora, analysts at Mumbai-based Edelweiss Securities Ltd., said in a May 2 note.
They expect cars and commercial vehicles to be the most affected, "since their sales are highly dependent on bank funding and susceptible to rise in interest rates and inflation."
Maruti Suzuki India Ltd. (532500.BY), the country's largest car maker by sales, posted a 7.6% rise in April to 73,905 cars.
Second-ranked Hyundai Motor Co.'s (005380.SE) sales grew 11% to 31,604 cars, but Tata Motors Ltd. (TTM), the third-largest car maker, reported a 1.1% decline to 19,544 cars.
The local units of General Motors Co. (GM) and Ford Motor Co. (F) posted a 1.7% and 11% decline in April sales at 7,105 cars and 7,941 cars, respectively.
Sales of Honda Motor Co.'s (HMC) local car manufacturing unit fell 43% to 1,990 cars in April, but the local unit of Toyota Motor Corp. (TM) recorded a more than six-fold increase in sales to 5,458 cars from 904 a year earlier, mainly due to strong demand for its Etios sedan.
"We are anticipating some postponement of purchases due to high interest rates and higher prices of vehicles due to commodity prices," said Sen. "Consumer confidence is also low as all the economic parameters are wobbling."
He said SIAM is maintaining its guidance of 16%-18% growth in car sales for the current fiscal year which started April 1 as sales are expected to pick up in the coming months.
Commercial vehicle sales grew 8.2% in April to 53,202 vehicles, mainly because sales of medium and heavy commercial vehicles rose only 0.7% to 22,391 vehicles. Sales of light commercial vehicles increased 14% to 30,811 vehicles, despite a decline in sales of light buses.
Commercial vehicle sales generally tend to slow in April as companies give bulk orders for vehicles in March, the last month of the financial year, to save on depreciation costs.
Sales of motorcycles increased 23% in April to 809,565 autos, boosted by gains at companies such as Hero Honda Motors Ltd. (500182.BY), Bajaj Auto Ltd. (532787.BY) and the local unit of Yamaha Motor Co. (7272.TO).
Scooter sales surged 48% to 175,054 autos, benefiting from growth recorded by the local units of Honda and Suzuki Motor Corp. (7269.TO) as well as TVS Motor Co. (532343.BY) and Hero Honda.
Also, several auto makers raised vehicle prices over the past few months to offset an increase in the cost of steel and other commodities.
All these factors led to the lowest percentage gain since June 2009 as car sales edged up 13% in April to 162,825 autos from 143,862 a year earlier, showed data issued Monday by the Society of Indian Automobile Manufacturers.
This is the lowest percentage rise since an 8.2% growth in June 2009, said Sugato Sen, a senior director at the automobile industry lobby group.
Car sales in India climbed 30% in the financial year ended March 31, the biggest increase since 1999-2000, as customers benefited from easier availability of low-cost loans, the introduction of new models as well as rising incomes in an expanding economy.
But a spate of interest rate increases by the central bank to control spiralling inflation, and a spurt in commodity costs resulting in higher vehicle prices, have since led customers to hold on to purchases of new cars, commercial vehicles and motorcycles.
"In line with our expectations, automobile sales have already begun to slow down," Sachin Gupta and Chetan Vora, analysts at Mumbai-based Edelweiss Securities Ltd., said in a May 2 note.
They expect cars and commercial vehicles to be the most affected, "since their sales are highly dependent on bank funding and susceptible to rise in interest rates and inflation."
Maruti Suzuki India Ltd. (532500.BY), the country's largest car maker by sales, posted a 7.6% rise in April to 73,905 cars.
Second-ranked Hyundai Motor Co.'s (005380.SE) sales grew 11% to 31,604 cars, but Tata Motors Ltd. (TTM), the third-largest car maker, reported a 1.1% decline to 19,544 cars.
The local units of General Motors Co. (GM) and Ford Motor Co. (F) posted a 1.7% and 11% decline in April sales at 7,105 cars and 7,941 cars, respectively.
Sales of Honda Motor Co.'s (HMC) local car manufacturing unit fell 43% to 1,990 cars in April, but the local unit of Toyota Motor Corp. (TM) recorded a more than six-fold increase in sales to 5,458 cars from 904 a year earlier, mainly due to strong demand for its Etios sedan.
"We are anticipating some postponement of purchases due to high interest rates and higher prices of vehicles due to commodity prices," said Sen. "Consumer confidence is also low as all the economic parameters are wobbling."
He said SIAM is maintaining its guidance of 16%-18% growth in car sales for the current fiscal year which started April 1 as sales are expected to pick up in the coming months.
Commercial vehicle sales grew 8.2% in April to 53,202 vehicles, mainly because sales of medium and heavy commercial vehicles rose only 0.7% to 22,391 vehicles. Sales of light commercial vehicles increased 14% to 30,811 vehicles, despite a decline in sales of light buses.
Commercial vehicle sales generally tend to slow in April as companies give bulk orders for vehicles in March, the last month of the financial year, to save on depreciation costs.
Sales of motorcycles increased 23% in April to 809,565 autos, boosted by gains at companies such as Hero Honda Motors Ltd. (500182.BY), Bajaj Auto Ltd. (532787.BY) and the local unit of Yamaha Motor Co. (7272.TO).
Scooter sales surged 48% to 175,054 autos, benefiting from growth recorded by the local units of Honda and Suzuki Motor Corp. (7269.TO) as well as TVS Motor Co. (532343.BY) and Hero Honda.
