Car sales in India were up 1.6 per cent in June, their slowest pace of growth in more than two years, as rising interest rates, fuel prices and vehicle costs hit demand in second-fastest growing auto market in the world.
Indian auto sales, which grew at a scorching 30 per cent in fiscal 2011, are mainly driven by the aspiration of the middle class that avails bank loans for its car purchases.
However, with the Reserve Bank of India revising interest rates 10 times since March last year in a bid to counter stubbornly high inflation, high cost purchases like car have started pinching the middle class which is now cutting back on such expenses.
According to analysts, the trend was not unexpected and rising interest rates and inflation are contributing to slowing sales. They also point out that demand for cars usually slows down before the monsoons.
Maruti Suzuki India sales at top car maker manufacturer Maruti Suzuki dropped 8.8 per cent to 80,298 vehicles in June, which was the first fall since December 2008.
Production at Maruti, majority-owned by Japan's Suzuki Motor, was hurt due to a strike led that caused a production loss of about 16,000 cars.