India car sales growth heads for slow lane

India's car sales are likely to post their weakest growth in nine years this financial year, compounding the country's gloomy economic outlook, as the automotive industry battles with high interest rates and slowing economic expansion.

Slumping GDP growth, rising fuel costs and expensive credit have slashed car sales in India, a market that was the toast of the industry two years ago and has attracted billion-dollar bets from global manufacturers hungry for growth.

The Society of Indian Automobile Manufacturers (Siam), a lobby group that represents the industry, will cut its car sales growth forecast for the year that ends in March between zero and 1 per cent, its deputy director Sugato Sen said.

Sales in December fell 12.5 per cent, Siam said on Wednesday, their second straight decline. Sales so far this financial year are down 0.33 per cent on the same period a year ago.

Car sales in India, where major domestic manufacturers include Tata Motors and Maruti Suzuki, have grown every year since the financial year that ended in March 2004. The cut will be Siam's third downgrade this financial year from an initial estimate of between 10 and 12 per cent.

After a 30 per cent expansion in sales in the financial year 2010-11, a slew of global car makers including Ford, General Motors, and Nissan invested billions of dollars in expanding their Indian operations.

But sales growth fell to just 2.2 per cent last year, as high interest rates and rising fuel costs deterred buyers, who are typically reliant on loans for purchases.

* Reuters