Car Sales In India: Tough Road Ahead

Auto sales in India is soon expected to have a bumpy ride down the hill after having speeded on a smooth flat road for the last two years. Inflation and the rise in the cost of ownership of a car are forcing customers to postpone car purchases.

According to an estimate car sales in India may go down by ten percent this year as there is a significant decline in the number of walk-ins and customer queries witnessed by some of the prominent car makers in the past two months, sources said. Primary reasons attributed to such a downturn in car sakes are climbing interest rates and rising fuel prices which are forcing customers to think twice before they even dream to purchase a car. And those who are really interested in owning a car are probing hard to find the best deals and interest rates available in the market, sources add.

In the year 2010-11, India witnessed a sharp uptrend in car sales by thirty percent leaving behind China in car sales. Soon, inspired by such huge inflow, major car makers such as Mercedes, BMW, Volkswagen, Toyota, Maruti, and Tata Motors pumped their resources into production and sales to meet the rising demand.

However, eyeing the trend in the last two months, auto majors have started responding and are busy preparing strategies to combat it. Some car makers are spotting and exploring new markets in India by expanding their dealerships. Experts believe that the increase in the interest rate from 11 to 15 percent in the past one year is the primary cause that is dampening car sales besides rise in fuel prices. It is also believed that prices of petrol and diesel may also go up further in the coming months following increase in crude oil prices and the coming assembly elections in West Bengal, Tamil Nadu, Assam, Kerala and Puducherry. It is also believed that such a decline in sales is an obvious reaction once the interest rate touches 15 percent mark and the car sales will normalize once the interest rates comes to an affordable level.