Rise in car sales in April slowest in a decade

The car price hike post-budget and rising interest rates have taken a heavy toll on passenger car sales in India. According to industry body Society of Indian Manufacturers Association (SIAM), passenger car sales grew just 3.4 per cent in April 2012 compared to the same month last year with 1,68,351 passenger cars sold in April 2012 as against 1,62,813 units in the year ago period. The 3.4 per cent growth is the slowest for the month of April in a decade.

The small car segment seems to be the worst affected with a meager 0.70 per cent increase, reflecting the price sensitive nature of the entry-level segment. In fact, for the first time in many years, the small car segment had reported a decline in growth in 2011-12 (FY12).

Small car customers are typically the most sensitive to interest rate fluctuations; also, small cars do not have diesel powertrains at a time when most of the growth in FY12 came from diesel cars. According to industry estimates, at least 400000 diesel car customers are waiting for deliveries even as petrol cars languish at dealerships.

However, sales of utility vehicles have witnessed a sharp rise. The sales in the UV segment grew 47.32 per cent, up nearly 31 per cent from March 2012. Now that is good progress.   

The industry insiders are expecting the Indian car market to bounce back this year with the Reserve Bank of India likely to rollback the interest rates as there is a perceptible drop in inflation. However, if the car loan rates remain high and diesel prices relatively lower than petrol, growth in small cars could again be dismal in 2012-13.

The Society of Indian Automobile Manufacturers (SIAM) has forecast 10-12 per cent growth in overall passenger cars for this fiscal, but this number may be lower if small car growth is again hindered.