Car sales in India are expected to post their weakest growth in nine years as automakers struggle with with falling demand caused by high interest rates and rising ownership costs.
Sales have also been hit by slowing GDP growth, rising fuel prices and expensive credit, all of which have brought one of the world’s fastest growing markets to a halt.
The Society of Indian Automobile Manufacturers (SIAM) said: “Negative sentiment among lower-end customers by virtue of interest rates not coming down, high fuel charges; all these put together is hurting."
SIAM cut its car sales growth forecast for the fiscal year ending 31 March to zero to 1% this week, its third downgrade this financial year from an initial estimate of 10-12%.
The Indian market has grown every year since 2004 and the slowdown has led SIAM to appeal to the government for industry boosting measures, including cutting taxes on larger cars in March's federal budget.
It added: “Going by current trends, we do not think the industry will be able to recover in the fourth quarter (January-March) unless government extends full support."
The society also called on the central bank to reduce interest rates are currently 8%.
India's rapidly-growing middle class, largely responsible for car sales growth, depend on loans and credit for big purchases.
Car sales in December fell 12.5% year on year, the second straight monthly decline and the fourth in five months. Sales so far this financial year were down 0.33% year on year.
However, the country’s largest automaker, Maruti Suzuki, which has 50% of the new car market, reported new car sales in India up 6.6% in 2012 due to strong demand for its new models.
It sold around 1.06m units last year, having recovered quickly from the impact of worker violence at its Manesar factory in July. Output at the strike hit factory returned to normal in late October.