Although car sales will continue to grow this fiscal through March at a fairly spanking rate of 12-13 per cent, this will still be half the rate of growth last year, according to industry body SIAM, the Society of Indian Automobile Manufacturers.
The slowdown is mainly due to a shortage of auto parts and a higher sales base of the previous year, SIAM said on Thursday. Contributing factors are the new emission norms and higher raw material prices that have pushed up manufacturing costs, and the rise in interest rates, which are widely predicted to increase further.
Vehicle sales have been robust in Asia's third-largest automobile market in recent months, driven by new models, government stimulus efforts and generally rising incomes. Sales rose 30.8 per cent in June from a year earlier, underlining strong expansion in India's industrial sector. Car sales reached 141,184 units against 107,948 a year ago, while sales of trucks and buses grew 44 per cent to 52,211 units, SIAM data showed.
Over the last fiscal year, domestic car sales surged 25 per cent to 1.53 million units, the highest gain in six years.
But the immediate future may not be quite as rosy. Car sales are forecast to touch 1.71 million units this year, SIAM president Pawan Goenka told a news conference in Mumbai. Total sales of cars and sport-utility vehicles will likely reach 2.19 million units, he said.
"Supply constraints have put a little bit of strain on production," Goenka, who is also president of Mahindra & Mahindra's automotive division, said. "We expect these constraints to continue in the second quarter as well. We might see some slowing down of growth from the second quarter onward."
Buoyant economic activity and expectations of near-normal monsoon rains this year are also likely to boost automobile demand in India.