February car sales in India fall the most in 12 years

Car sales in India slumped 25.7 per cent in February, the biggest fall in more than 12 years and the fourth consecutive monthly slide, an industry body said on Monday, as sluggish economic growth continues to weigh on demand.

The industry is expected to see it first decline in annual sales in a decade as high interest rates and rising fuel costs in Asia's third-largest economy put off buyers in a market that was once one of the world's most promising.

Automakers sold 158,513 cars in India last month, data from the Society of Indian Automobile Manufacturers (Siam) showed. Car sales are down 4.6 per cent for the first 11 months of the fiscal year ending in March, it said.

"There is no improvement in the market sentiment. People have more or less stopped discretionary purchases," Sugato Sen, deputy director general of Siam said.

"This has really impacted the bottom of the pyramid, people who buy the smaller cars," he said, referring to the slowing economy that is expected to grow 5 per cent, a decade low. "That is getting reflected in the numbers."

Siam last month cut its car sales growth forecast for the year that ends on March 31 to between zero to 1 per cent, its third downgrade this financial year from an initial estimate of between 10 to 12 per cent.

Mr Sen, however, said that car sales in March were unlikely to reverse the falling trend for this fiscal year and annual sales were expected to end up in the "negative territory" for the first time since the 2002/03 fiscal year.

The demand for cars is likely to be hit in the near term by a surprise hike in taxes on sports utility vehicles (SUVs) in the last month's budget for the coming fiscal year. The demand for SUVs had provided some cheer for the automakers.

"We fear that there will be a change. There will be an impact," Mr Sen said.

* Reuters