NEW DELHI: Car sales started the new fiscal on a modest note as rising interest rates and fuel prices are set to moderate demand from the scorching 30%-plus growth rate of 2010-11.
Companies are already concerned about the "negatives" that are building up at a time when vehicle prices have gone up due to higher input costs, hitting affordability and sentiments. Maruti and Hyundai both spoke of decline in footfalls. And with the central bank
RBI expected to tighten key interest rates further in its monetary policy review on Tuesday, the industry remains nervous.
"Higher prices of fuel and rising interest rates are already creating a pressure in the market. Footfalls in showrooms have come under pressure," Maruti's managing executive officer (sales and marketing) Mayank Pareek said. Hyundai's marketing and sales director Arvind Saxena said the bearish trend was likely to continue. "The rising interest rates have led to reduced enquires and the conversion rate too has slowed down," Saxena said.
The after-effects of the Japanese quake, that has forced companies like Honda and Toyota to slash production, are likely to put further pressure on sales. Maruti's sales in April grew in single digit. The company said domestic volume stood at 87,144 units, up by 9%. For Hyundai, the growth was 11% as it sold 31,636 units in the first month of this fiscal.
The biggest disappointment came from Japanese giant Honda, which saw volumes fall by as much as 44% at 2,012 units. "As announced earlier, the Japan issue prompted us to reduce production at our Greater Noida plant to 50% from this month. However, production adjustments for a smooth transition began from mid-April," said Jnaneswar Sen, sales and marketing head at Honda Siel Cars.
New models from Ford, Volkswagen and Toyota had led the charge last year.
However, a strong base caught up with Ford that saw volumes decline by 2.5%. It will launch its new global sedan Fiesta in the market soon as it goes ahead with its plans to bring in eight new models by 2015.
Analysts said any big push in demand will come only from the new models that would hit the market later this fiscal. However, doubts have surfaced even on this as the Japanese quake and tsunami have impacted the plans of Honda and Toyota, both of whom are slated to get in new small cars. While Toyota has to launch the Liva compact, Honda is to get the Brio hatchback. "The situation remains fluid as we speak," Sen said.
The analysts said that despite the negatives, the economic growth is expected to keep demand going. "So long as the economy continues its pace, there is not a big worry for companies as salaries will rise and jobs created. This will keep the momentum going, although at a slower pace," an analyst with a brokerage firm said.
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Companies are already concerned about the "negatives" that are building up at a time when vehicle prices have gone up due to higher input costs, hitting affordability and sentiments. Maruti and Hyundai both spoke of decline in footfalls. And with the central bank
RBI expected to tighten key interest rates further in its monetary policy review on Tuesday, the industry remains nervous.
"Higher prices of fuel and rising interest rates are already creating a pressure in the market. Footfalls in showrooms have come under pressure," Maruti's managing executive officer (sales and marketing) Mayank Pareek said. Hyundai's marketing and sales director Arvind Saxena said the bearish trend was likely to continue. "The rising interest rates have led to reduced enquires and the conversion rate too has slowed down," Saxena said.
The after-effects of the Japanese quake, that has forced companies like Honda and Toyota to slash production, are likely to put further pressure on sales. Maruti's sales in April grew in single digit. The company said domestic volume stood at 87,144 units, up by 9%. For Hyundai, the growth was 11% as it sold 31,636 units in the first month of this fiscal.
The biggest disappointment came from Japanese giant Honda, which saw volumes fall by as much as 44% at 2,012 units. "As announced earlier, the Japan issue prompted us to reduce production at our Greater Noida plant to 50% from this month. However, production adjustments for a smooth transition began from mid-April," said Jnaneswar Sen, sales and marketing head at Honda Siel Cars.
New models from Ford, Volkswagen and Toyota had led the charge last year.
However, a strong base caught up with Ford that saw volumes decline by 2.5%. It will launch its new global sedan Fiesta in the market soon as it goes ahead with its plans to bring in eight new models by 2015.
Analysts said any big push in demand will come only from the new models that would hit the market later this fiscal. However, doubts have surfaced even on this as the Japanese quake and tsunami have impacted the plans of Honda and Toyota, both of whom are slated to get in new small cars. While Toyota has to launch the Liva compact, Honda is to get the Brio hatchback. "The situation remains fluid as we speak," Sen said.
The analysts said that despite the negatives, the economic growth is expected to keep demand going. "So long as the economy continues its pace, there is not a big worry for companies as salaries will rise and jobs created. This will keep the momentum going, although at a slower pace," an analyst with a brokerage firm said.
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