India is facing its worst decline in auto industry after sales fell in April for the sixth consecutive month, due to the economic gloom and increasing ownership costs.
The gloom economy in India, increasing fuel costs and high interest rates have all drastically affected demand for vehicles in a market where automakers have expected a booming growth.
“The economy is not doing well … giving negative signals to consumers,” said Sugato Sen, senior director at the Society of Indian Automobile Manufacturers (SIAM), which compiles the sales data. “Car purchase is always a discretionary purchase, I can always postpone it. That is what is happening.”
In April auto sales dropped an annual 10.4%, the first time when sales have fallen for the sixth consecutive month since 1997. During the financial year ended March sales fell 7%, the first annual drop for the past 10 years, affecting leading automakers such as Ford and GM which have made investments of billions of dollars in a market which increased 30% two years ago.
Analysts predict that positive growth will be seen in about three or four months, as finance costs begin to slowly drop. In India more than 80% of the vehicle sales are financed using credit. The Society of Indian Automobile Manufacturers expects sales to increase between 3% and 5% this financial year ending March 2014. In April automakers sold 150,789 units in India, a decrease of 10.4% from April 2012.