Mumbai: Passenger car sales fell for the third straight month in September, hit by a slew of factors led by erratic monsoon rainfall and a devastating flood in Kerala. Car makers on Monday said unfavourable macroeconomic conditions and the high base of last year also contributed to the decline.

India’s top five carmakers—Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra and Mahindra Ltd, Tata Motors Ltd and Honda Cars India Ltd—together sold 237,009 units last month, a 2% drop from the figure a year ago. Auto makers in the country consider factory dispatches to dealerships as sales.

While car sales had been growing at a healthy pace since November 2017, boosted by new launches and a recovery in rural demand, they have shown a downtrend for the third consecutive month in September—they fell in July due to a high base effect of the year-earlier month and generally tepid demand during the monsoon season, and as customers waited to order new models in the festive season. In the next month, sales dropped because of reasons similar to the ones cited for September.

Before July, car sales declined in June last year, when buyers held back purchases to benefit from lower rates under the goods and services tax (GST) regime, rolled out on 1 July 2017.

Auto makers begin to build up inventory in anticipation of higher demand in the forthcoming festival season. However, the first 10 days of October are likely to see muted sales in some regions, especially North India, as it marks the Shraadh period, considered inauspicious for big purchases such as cars, gold and real estate.

An early festival season, beginning in September last year, as opposed to October this year, caused a high base, while a change in the GST cess for multi-utility vehicles led to some pre-buying in September, said Subrata Ray, senior group vice president (corporate sector ratings) at ratings agency Icra Ltd.

“If you combine September and October this year and compare year-on-year, growth should be normal," he said, adding that there was “some" impact due to flooding in Kerala, while urban demand took a hit due to rising interest rates, inflation and fuel prices.

India’s largest carmaker, Maruti Suzuki, on Monday posted a marginal rise in local car sales in September to 136,876 units from 136,786 units a year ago, stemming two consecutive months of decline. The figures exclude sales of Maruti Suzuki’s Omni and Eeco vans and light commercial vehicle Super Carry.

The local unit of Suzuki Motor Corp. reported a decline in sales in July and August after several months of robust demand for its wide range of cars, on the back of uneven monsoon rains and devastating floods in Kerala.

Maruti Suzuki this year has introduced facelifts of models such as the Swift hatchback, the DZire compact sedan and the Ciaz mid-sized sedan, expecting robust sales to end the year with double-digit growth.

The compact car segment, which makes up the bulk of Maruti Suzuki’s sales, rose 1.7% to 74,011 units in September. With the exception of July and August, this segment had been reporting growth upwards of 20% in the past few months mainly on account of demand for the 2018 Swift hatchback and Dzire compact sedan, and continued popularity of premium hatchback Baleno.

While sales of entry-level cars Alto and WagonR fell 9.1% to 34,971 units last month, the sports utility vehicle segment comprising Vitara Brezza and S-Cross models, posted a rise of 8.7% to 21,639 units over that of 2017. Sales of the Ciaz grew 11.5% to 6,246 units.

The unfavourable demand environment affected Hyundai India, as the local unit of the South Korean firm posted a 4.5% drop in domestic sales to 47,781 units last month.

“Despite some ongoing market challenges, we expect this festival season will induce positive sentiments among customers and the industry would witness a strong positive growth," said Vikas Jain, national sales head at Hyundai India.

The maker of the rugged Bolero and Scorpio SUVs, Mahindra, posted a sharp decline of 16% in sales to 21,411 units in September despite the launch of the Marazzo multi-purpose vehicle. Rajan Wadhera, president of Mahindra’s automotive sector, said September was “muted" due to factors such as “low consumer buying sentiment, high fuel prices and the effects of monsoon in many parts of the country".

“We remain hopeful that the upcoming festive season will augur well for us as well as the automotive industry," he added.

Ray of Icra expects local passenger vehicle sales to rise 9% this fiscal, a forecast that has remained unchanged since the start of the year.

“The rural market would remain the key driver for overall growth as we expect the steady, strong, positive traction to continue. Overall rural sentiment will remain positive," he said.

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