Vehicle sales in India hit a brick wall over costs

India Dispatch: The brakes have been slammed on for vehicle sales in India.

The brakes have been slammed on for vehicle sales in India.

Sales of cars in India last month fell for the first time in 10 months, while motorcycle sales declined for the first time in three and a half years.

High interest rates and fuel prices have been blamed for the decline as economic growth in India slows. A lockout at the Maruti Suzuki factory in Manesar following deadly riots this year only added to the drop.

Last month, car sales declined almost 19 per cent, to 118,142 vehicles, compared with the same month last year, according to figures from the Society of Indian Auto Manufacturers. Meanwhile, sales of motorcycles declined by 8.5 per cent over the same period.

Overall passenger vehicle sales, including vans and utility vehicles, fell by almost 4 per cent, the data showed. Heavily subsidised diesel prices mean consumers are increasingly opting for diesel cars, which are cheaper to run, with petrol prices in India being relatively high, analysts say.

The difference between the running costs for a petrol-driven car versus diesel has increased by 85 per cent in the last seven to eight years," according to Crisil, an Indian ratings and research firm.

"Diesel cars have, therefore, become more lucrative for buyers; the proportion of diesel cars in total car sales has increased to 38 per cent in the financial year 2011-12 [compared with] 20 per cent in 2005-06," Crisil reported.

Published: September 14, 2012 04:00 AM