New Delhi: Following subdued growth in car sales in the last four months, credit ratings agency Icra Ratings Ltd revised its projection to 7-8% from an earlier guidance of 8-9% for 2018-19. The agency though expects sales of medium and heavy trucks to grow around 18-20% in the current financial year since demand from the infrastructure sector continues to be strong.

As result of the increase diesel and petrol prices and interest rates on auto loans, customer sentiment had nosedived which led to a fall in sales growth of passenger vehicles in the June-October period.

“Domestic passenger vehicle sales slowed to 6.1% during the first seven months of 2018-19, amid sluggish customer sentiment due to high fuel prices and a rising interest rate. Factors such as the Kerala floods (during the peak Onam season), a delayed festive season, and high base in the second quarter of 2017-18 also weighed on the overall growth rate during the second quarter of the current financial year, resulting in domestic wholesale passenger vehicles dispatches declining by 3.6%," said analysts of the ratings agency in a research note.

According to Icra, growth in sales of light commercial vehicles will be in the range of 18-20% while bus sales will grow around 12-14% in the current financial year.

As for heavy commercial vehicle sales, Icra is of the opinion that despite short-term challenges arising from the liquidity crunch and declining profitability of fleet operators, commercial vehicle sales are stable on underlying demand from the infrastructure sector and increased demand from freight generating sectors such as steel, cement and exports and imports. The liquidity crunch in the shadow banking industry though will impact the operations of fleet owners in the short and medium term.

“Icra’s channel check suggests that lending to small fleet operators with relatively weak credit profiles would be impacted the most in the near-term. However, as the liquidity scenario improves, the industry is likely to witness pre-buying in 2019-20 ahead of the roll-out of new emission norms," said Icra in the note.

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