NEW DELHI: Car sales in India slid by over 12 percent in May, data showed yesterday, marking an unprecedented seventh straight month of decline, and an industry body warned that layoffs loomed in the once-booming sector.
Domestic passenger car sales, seen as a pointer to overall economic health, plunged 12.26 percent to 143,216 in May from the same month a year earlier, the Society of Indian Automobile Manufacturers (SIAM) said.
“These are worrying times for the automobile industry,” SIAM director general Vishnu Mathur told reporters. “This is the longest stretch of consecutive decline in car sales we have witnessed” since SIAM started compiling figures 16 years ago, he added.
The downturn is in sharp contrast to the previous decade when car sales grew by a breakneck annual 20 to 30 percent — prompting foreign automakers from Ford to Volkswagen to make a beeline for the country as they sought to boost sales globally.
Layoffs in the Indian auto sector could start soon with parts suppliers likely to be among the first affected as buyers steer clear of showrooms, Mathur said.
Mathur blamed consumer worries over a sharp slowdown in the economy which has been growing at a decade low of five percent, saying “discretionary spending is being hit”.
“Production is already being cut back by some manufacturers by 10 to 15 to 20 percent ,” Sugato Sen, SIAM senior director, said, adding this would lead to job losses in the industry.
The Indian car sales shrinkage comes as growth in China’s car sales in May slowed to 9.9 percent year-on-year from a double-digit rise in April, amid waning consumer confidence. The European auto market is expected to shrink for a sixth year in a row.
Stuttering demand has forced Indian automakers to introduce “buy now, pay later” schemes, interest-free repayments and double-digit discounts.
Sales of commercial vehicles such as trucks and buses, another key pointer to economic vitality, dropped by 10.6 percent to 55,458 from the year-earlier period, SIAM’s figures showed.
A fall in India’s currency to record lows against the dollar has cast doubt over hopes that the central bank will cut interest rates further to kickstart the economy.
The declining rupee has also raised the prospect of car price rises and steeper fuel costs that would deter buyers further, as the weaker currency pushes up import costs.
“Two months ago, we thought the industry was poised for a good recovery. Now it seems we will have to rethink these numbers,” analyst Mahantesh Sabarad of Mumbai’s Fortune Equity Brokers said.
Domestic passenger car sales fell by 6.7 percent in the last financial year ending March 2013 to 1.89 million from a year earlier — the first contraction for 10 years.
SIAM’s Sen said the industry body was not yet revising its forecast that car sales will grow by three to five percent in the current financial year. It is hoping that sales will pick up later in the year.
AFP
