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Traffic Jam in India’s car sales

Car sales in India rose at the slowest pace in two years. Demand for cars in India is sliding, expecting more losses according to analysts further descend could be on the way.

Sugato Sen, senior director at the Society of Indian Automobile Manufacturers said that Interest rate is going up, prices are rising, and availability of finance is down. All this put together is affecting sales. Rising interest rates are forcing middle class consumers to hold their money.

Car sales in India roses 7 percent in May, higher fuel prices and vehicle costs obstructing the demand of auto sales in the world’s second-fastest growing vehicle market after China.

Pawan Goenka, president of the Society of Indian Automobile Manufacturers (SIAM), said on Monday that if policy rates further increased or changed, it would have a devastating effect on the industry.

India’s central bank has raised interest rates nine times since March last year. It is expected to raise them again this month. Rising in fuel prices in India by a record of 8.6% concerns about a slowdown in demand for passenger vehicles, with another increase in interest rates also expected to restrain buying.

Sales in China, the world’s largest auto market, which grew 33percent last year, are also expected to slow after the government removes most of its incentive policies at the end of 2010.

China, with a comparable population to that of India, also enjoyed auto sales growth of 33 percent last year. But the Chinese market sells far more cars: Chinese car sales reached 13.8 million units in 2010, while Indian sales totaled 1.9 million units. According to Siam data, car sales in India rose 1.6 percent in June from a year earlier to 143,370.

Earlier this month, India’s largest automaker, Maruti Suzuki also dropped sales to a great extent. The sales dropped by 8.8 percent this June. This was the first time Maruti saw a decline in sales since December 2008.Apart from Maruti sales of India’s largest trucks and bus maker Tata Motors also saw a decline in sales.

Even though most car companies in India saw a downfall in their sales the foreign companies like Nissan and Toyota are still reportedly making good sales. Several foreign companies like Toyota, Volkswagen too are reportedly having good sales as they are coming up with new models boosting their sales in the Indian market.