The forecasters at LMC Autmotive have cut their forecast for vehicle sales in India on the back of recent problems for the Indian economy.

LMC says that the “challenging situation in India brought about by a slowing economy, rupee depreciation and rising inflation” has brought about the downward revision.

The 2013 light vehicle outlook has been lowered by 132,000 units, or down by 4%, compared to LMC's previous forecast last month. Sales are currently projected at 2.88m units, which represents a decline of 12% year-on-year.

The passenger vehicles outlook for calendar 2013 has been taken down by 125,000 units, or 5% lower than last month, to 2.34m units (-8% YoY). The outlook for light commercial vehicles up to GVW 6 tons was reduced by 7,000 units to 537,000 units (-25% YoY).

In August, light vehicle sales were at about the same level as the previous month but were down on year by 1% at 222k. Passenger vehicle sales climbed 6% YoY to 174; however, the increase was over depressed volumes in 2012 when Maruti Suzuki had locked out its Manesar facility for 20 days.

“OEMs will find it difficult to significantly boost sales in this festival season, and will be forced to offer higher incentives to win buyers,” said Ammar Master, senior market analyst for India at LMC Automotive.

“Newer vehicles such as the recently launched Maruti Suzuki Wagon R Stingray and Hyundai Grand i10 will garner numbers but these are likely to come from the existing versions in the market. We believe the overall sentiment remains weak in India,” he added.

However, LMC said that while the rupee’s depreciation is certainly a 'cause of worry', it does not believe that India is headed towards a 'full-blown financial crisis'. It cites ample ample foreign reserves, and an improving global outlook which should support India’s exports. 

LMC forecasts that the 2014 light vehicle market will recover to 3.15m units, a 9% increase over 2013. The market is expected to expand at a CAGR of 17% in the next six years and India is forecast to have a market size of 8.18m light vehicles sold a year by 2020.