Maruti shows record fall in monthly sales
Leading Indian car maker Maruti Suzuki on Aug 1, 2011, reported its sharpest-ever fall in monthly sales due to higher borrowing costs and disruptions to its production. The fall was part of a wider decline in vehicle sales due to rising prices of fuel and raw materials plus more expensive loans, which also hit rival firms including Tata Motors and Hyundai India. New Delhi-based Maruti, which is majority-owned by Japan's Suzuki Motor Corp, said it sold 75,300 units in July, down a massive 25.3 percent from a year earlier. A company spokesman, speaking on condition of anonymity in line with company policy, told AFP it was the biggest drop in monthly sales since it started operations in India in 1983. Tata Motors said it sold 63,761 commercial and passenger cars in the same period, down six percent year-on-year. Its flagship small car, the Nano, sold just 3,260 units -- down 64 percent year-on-year. India's second-largest car maker Hyundai Motor India sold 49,667 units, a dip of 1.48 percent decline from a year earlier. US giant Ford's subsidiary, Ford India, on the other hand saw sales grow 10.75 percent to 10,706 units in July, aided by continued strong sales of its Figo model. Car sales in India -- seen as an indicator of the country's economic health -- have been slowing in recent months after breakneck growth for nearly two years with buyers delaying purchases due to higher interest rates and fuel prices. Indian auto makers have also been forced to push up prices of vehicles by an average four percent in the past year, led by higher steel and rubber prices. Last week, India's central bank raised interest rates for the 11th time in 17 months to battle near double-digit inflation in a move that hiked borrowing costs for consumers. "Rising input costs have delayed purchases and regular interest rate hikes have hit business confidence and the willingness to buy goods," said Jagannadham Thunuguntla, head of research with SMC Global Securities. Mahantesh Sabarad, of Fortune Equity Brokers in Mumbai, said the environment for auto sales will be "challenging", with rate hikes and high inflation major dampeners. Maruti said while the overall automobile market had turned sluggish, sales also fell due to a planned shift in production of its super-compact Swift Dzire cars. Production of the Dzire was moved from one factory in Manesar, in northern Haryana state, to nearby Gurgaon, temporarily affecting output, according to a company statement. The company also stopped new deliveries of the old version of its Swift model in July, before the planned launch of a new version in mid-August. Sales of the old model fell by 97 percent year-on-year as a result. Maruti had also reported a drop in sales in June after a strike that stopped production of cars for 11 days when workers at its Manesar plant downed tools to demand recognition of a new union. The walkout cost Maruti nearly $93 million and hit the production of about 12,600 cars, mainly the Dzire and SX4 models. Maruti's small car models, including the popular M-800, Alto and A-Star, as well as the SX4 and Dzire plus the multi-utility-vehicle segment all posted lower year-on-year sales in July. Analysts said that the longer-term sales outlook is still strong for India, where just one in 10 households in urban areas and one in 50 in rural areas own cars.
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