ANNUAL car sales in India are likely to drop for the first time since 2002 in the fiscal year ending in March, after January sales fell short of expectations, an industry body said.

Car sales, which grew 30 percent in the year ending in March, last year, posted their first monthly fall in three years last July as high financing and running costs deterred buyers.

“The car industry is too sensitive to interest rates, and we don’t see interest rates coming down quickly,” Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers (SIAM), told reporters yesterday.

“Unless sales grow in February-March at 10 to 12 percent, which is unlikely, the industry will miss the sales projection,” he said, referring to its forecast for zero to 2 percent growth.

Indian car sales have risen every year since the fiscal year that ended in March 2002, according to SIAM data.

Car sales rose 7.2 percent last month from a year earlier, the third consecutive monthly rise, but less than required for automakers to make up for record sales falls late last year.

Sales rose in November and December, offering encouragement to an industry that had experienced four consecutive months of falling sales.

The SIAM expects vehicle sales to increase by 11 to 13 percent in the fiscal year starting April 1 if the Reserve Bank of India begins to ease interest rates soon. The central bank has raised interest rates 13 times since March 2010 in its battle against stubborn inflation.

“The market has factored in falling sales this year, given how much sentiment has been subdued by high interest rates,” said Nikhil Deshpande, auto analyst at PINC Research in Mumbai.

“You won’t see substantial growth until rates start coming down, not before next month or April, and people begin to get used to the higher petrol prices,” Deshpande added. Automakers sold 196,013 cars last month, the SIAM said. Total car sales for the fiscal year to last month stood at 1.57 million, down 1.19 percent from the period a year earlier. (SD-Agencies)

Indian car sales are mainly driven by a rapidly expanding middle class that is typically reliant on loans for purchases.

Many companies have offered large discounts in recent months as well as trade-in deals for motorcycles ***-- a family vehicle in India ****-- to tempt first-time buyers.

India’s once-soaring sales growth has spurred a slew of global carmakers such as Ford Motor Co. and General Motors Co. to ramp up their operations in Asia’s third-largest economy in search of growth.