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Car sales slow in June as firms cut discounts

Car sales slow in June as firms cut discounts
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First Published: Thu, Jul 10 2008. 10 34 PM IST

Few takers: A file photo of a Hyundai showroom in New Delhi. (Photo: Madhu Kapparath/Mint)
Few takers: A file photo of a Hyundai showroom in New Delhi. (Photo: Madhu Kapparath/Mint)
Updated: Thu, Jul 10 2008. 10 34 PM IST
New Delhi: Car sales in India rose an annual 6.1% in June, the slowest monthly expansion so far this fiscal year, as rising costs forced car manufacturers to cut down on discounts and other incentives.
Firms sold 99,738 passenger cars in June, with sales growth sharply slower than the 14.3% seen in May and 17.2% in April, data released on Thursday by the Society of Indian Automobile Manufacturers (SIAM) showed.
Few takers: A file photo of a Hyundai showroom in New Delhi. (Photo: Madhu Kapparath/Mint)
It was also well below the 16.4% expansion seen in June 2007. Car sales in the April-June period rose 12.4%, little changed from the 12.7% growth in the year-ago period.
Car makers have offered discounts to boost demand in a competitive market, but rising costs of raw materials such as steel have squeezed margins.
“People were trying to boost sales by discounts,” Sugato Sen, senior director at SIAM, said. “Margins are under pressure (now), so discounts and other incentives are drying up,” he added.
Demand has also been dented by double-digit inflation in the country, rising interest rates and higher fuel prices, Sen said. Inflation is at a 13-year high, and the central bank has raised its key lending rate to the highest in more than six years, bumping up rates on automobile loans.
State-set fuel prices were raised by about 10% in June after global crude oil prices surged to record highs.
Sales of commercial vehicles rose 13.5% to 40,324 units in June, chiefly on large bus orders from state-run transport firms, Sen said.
Motorcycle sales rose 8.3% to 473,899 units in the month. Bike sales have revived this year following an 11.9% decline in the year to March, and analysts expect the two-wheelers to be more attractive to customers as they have lower operating costs than other vehicles.
Reuters
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First Published: Thu, Jul 10 2008. 10 34 PM IST