Rising raw materials costs and interest rates will lead to lower demand for new cars in India with growth more than halving this fiscal year to 12-15% from the highs of 30% a year ago.
Auto sales in India grew to 1.98m units in 2010-11 driven by a burgeoning middle class in Asia’s third-largest economy, easier access to loans and a wider choice of models.
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Pawan Goenka, president of industry body Society of Indian Automobile Manufacturers (SIAM), said, however, that commodity prices, already at an all-time high, are expected to increase further – a bigger concern to the industry than interest rates.
The rising cost of steel, rubber and other inputs has forced some Indian carmakers to raise prices in recent months. Goenka, who is also Mahindra & Mahindra’s automotive president, said the utility vehicles maker has raised prices on most of its models by 1.5 to 2% from last week.
Maruti Suzuki has raised prices by up to 2.4% across all models following two price increases in three months.
Car sales in India rose 24.4% in March to 194,199 units, according to SIAM, while sales of trucks and buses, a key pointer to economic activity, rose 15.4% to 77,688. Goenka said passenger car sales for the next year are expected to grow at 16 to 18%.
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