Tata Motors flat fiscal first quarter profit lagged estimates after higher costs squeezed margins and the automaker said rising interest rates was a matter of concern.

“Going forward, (we expect) slowing growth in commercial vehicles prompted by rising costs, interest rates and inflationary concerns, and expectations of slowing industrial growth,” CFO C Ramakrishnan said at a press conference, Reuters reported.

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India has raised interest rates 11 times since March 2010 to combat stubborn inflation, hurting industries based on credit including the auto industry  where many buyers rely on loans to buy cars. Tata’s sales fell in July, led by a slump in sales of the Nano, which slid 64%.

Overall car sales in India fell 15.8 percent in July, the first drop in two and a half years, and higher interest rates and car prices are expected to hurt demand further.

Tata has planned annual capital expenditure of INR30bn to INR35bn for its India business, Ramakrishnan said, adding that sales from its JLR unit should continue to improve as it expands into growth markets such as India, China, Brazil and Russia.

Tata posted first-quarter net profit of INR19.99bn (US$441.7m), compared with INR19.89bn a year earlier. Its net debt at the end of June stood was INR150bn.

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Tata Motors’ consolidated revenue rose 24% to INR335.72bn. A Reuters poll had forecast net profit of INR21.6bn on net sales of INR329.1bn.

Tata spent INR203.9bn on raw materials in the quarter compared with INR148.5bn a year earlier.

Revenue at Jaguar Land Rover rose 20% to GBP2.7bn. Sales at the unit will not be hurt by economic uncertainty in the short term, chief executive Ralf Speth said at the media briefing.

JLR operating profit up 17%