Hit hard by higher interest rates and pinching fuel prices, car sales grew at their slowest pace in two years, threatening to slip even further in the coming months. Data released by industry body Society of Indian Automobile Manufacturers (Siam) for May showed 7% growth—the lowest since 2.8% increase in May 2009. A slowdown in the big-volume small car segment impacted the overall growth rate as sales stood at 1.58 lakh units against 1.48 lakh units in May last year. Six of the total 16 carmakers reported a year-on-year decline in volumes, including Tata Motors, Honda, Ford and General Motors. Even a heavyweight like Maruti Suzuki barely managed to stay positive with near-flat volumes. Last fiscal’s 30% demand has been waning as interest rates and petrol price inch up. They have raised the running cost for buyers with higher EMIs and fatter fuel bills. As much as 70% of cars are sold through financing. High inflation is also dampening sentiment. Siam said it may have to revise its industry forecast for 2011-12, considering the slowdown. Company officials are already complaining of a drop in footfalls at showrooms. The industry fears the worst in June and July, pinning hopes only on new models.
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