After an average double-digit growth in the last two and a half years, the passenger car market in India, for the first time, has witnessed a dip of 1.71% at 87,724 units in July 2008, compared with 89,250 units in the same month last year, thanks to rising oil prices, higher interest rates and lack of finance. Last time the decline in sales happened in November 2005 when the segment witnessed a dip of 2.3% at 68,840 units compared with 70,468 units in November 2004.

“It is for the first time after November 2005 that the passenger car segment has registered a decline that is largely due to cost of finance and its availability,” said Dilip Chneoy, director general, Society of India Automobile Manufacturers (SIAM).

According to SIAM, while market leader Maruti Suzuki India registered a growth of 1.45% at 45,757 units in July against 45,101 units in the same month last year, sales of Hyundai Motors remained flat at 15,061 units last month compared with 14,981 units in the same period a year ago. Sales of General Motor India went up 48.7% at 4,415 units as compared to 2,969 units last year.

Tata Motors, however, recorded a decline of 8.87% at 12,012 units against 13,181 units in the same month previous year. Due to significant decline in sales of Honda Civic, Honda Siel Cars India also posted a dip of 7.01% at 4,006 units vis-?-vis 4,308 units in July last year.

“The euphoria around excise duty reduction that had helped maintain the growth momentum in the first quarter has waned. High interest rates, high inflation and increase in car prices have lowered the buying power of a large section of people and the impact is now becoming visible,” says Arvind Saxena, senior vice-president, Hyundai Motors.

“Monsoons are generally lean period for passenger cars especially in areas with heavy rain as people tend to postpone their purchase. This July has been worst because of an increase in car prices and the on-going hike in interest rates,” says Jnaneswar Sen, senior general manager, Honda Siel.

According to SIAM, the worst hit has been the executive segment, which includes Chevrolet Optra, Honda Civic, Skoda Octavia and Combi, Toyota Corolla, BMW 3 Series and Mercedes C-Class. This segment clocked 1,983 units last month against 3,150 units in July last year, a dip of 37.05%.

“In the overall context of inflation and the drive by RBI to curtail money supply this was expected,” SIAM’s Chneoy added. “But while they may help in controlling inflation, they are not helping the automotive industry.”

Two-wheelers, however, registered a growth of 19.47% in July at 5,99,369 units against 5,01,691 units in the same month last year. While sales of motorcycles jumped 21.91% at 4,57,178 units, against 3,75,004 units in July 2007.

Scooters registered a growth of 6.36% at 97,905 units against 92,048 units in July last year.

Market leader Hero Honda Motors sold 2,60,324 units of motorcycles in July 2008 against 1,86,848 units in July 2007, a growth of 39.32%. Rival Bajaj Auto, however, posted a decline of 2.46% at 1,13,440 units as compared to 1,16,305 units last year. Sales of Chennai-based TVS Motors went up 11.95% at 39,448 units against 35,237 units in the same month last year.

In the scooter segment, while market leader Honda Motorcycle & Scooter India registered a growth of 10.81% at 56,584 units against 51,062 units during the same month last year, sales of Hero Honda Motors went up 56.98% at 12,340 units from 7,861 units in the same month last year.