Mumbai: Passenger car sales rose marginally in October after declining for three straight months, mainly propelled by the launch of the new Hyundai Santro compact hatchback. Carmakers on Thursday said they remain cautious on how the industry will fare during Diwali next week.

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 230,870 vehicles last month, a 2.06% rise from a year earlier. Automakers consider factory dispatches to dealerships as sales.

While car sales had been growing at a healthy pace since November last year, boosted by new launches and a recovery in rural demand, they slowed between July and September due to various factors—ranging from a high base in July 2017 to erratic monsoons and worsening macroeconomic conditions in September, which continued into October.

The festive season in India, which began with Onam in early September, is one of the most important periods during the year for carmakers as buyers consider it auspicious to make big-ticket purchases such as cars, gold and real estate.

So far this year, consumer sentiment during the festive season has been low and has even resulted in a drop in retail sales, owing to factors such as higher inflation, interest rates, insurance premiums and fuel prices, in addition to irregular monsoons and devastating floods in Kerala.

The domestic sales growth for the passenger vehicle industry is over a low base of October 2017 due to a delay in the festival season by a month this year, said Hetal Gandhi, director at ratings agency Crisil Research.

The cost of vehicle ownership is estimated to have risen by about 9% this fiscal as compared with an average of 2-4% for the past five years, she added.

Maruti Suzuki, India’s largest carmaker, reported a marginal drop in its domestic car sales to 122,280 units in October, from 122,459 a year earlier. Maruti Suzuki’s car sales have fallen in three of the past four months. The figures exclude sales of Maruti Suzuki’s Omni and Eeco vans and light commercial vehicle Super Carry. Despite introducing facelifts of models such as the Swift hatchback, Dzire compact sedan and Ciaz mid-sized sedan, Maruti Suzuki may not be able to achieve its double-digit volume guidance for this fiscal year, analysts said.

The compact car segment, which makes up the bulk of Maruti Suzuki’s sales, rose 3.7% to 64,789 units in October. While sales of entry-level cars Alto and WagonR also grew 1.1% to 32,835 units last month, its sport utility vehicles comprising Vitara Brezza and S-Cross models posted a 11% drop to 20,764 units.

Meanwhile, the launch of new Santro buoyed Hyundai India’s monthly sales, as the local unit of the South Korean firm posted a 4.87% rise in domestic sales to 52,001 units in October.

Other popular Hyundai models such as the Creta compact SUV, and Grand i10 and Elite i20 hatchbacks, also supported sales, said Vikas Jain, national sales head at Hyundai India.

Mahindra and Mahindra posted a 2.6% rise in sales to 24,066 units despite the launch of the Marazzo multi-purpose vehicle.

Rajan Wadhera, president of Mahindra’s automotive sector, said “the automotive industry has been witnessing subdued retail sales" for the past few months, owing to “low consumer buying sentiment". “Therefore, one has to remain cautious on how the festive season, ultimately, turns out to be," he added.

Analysts at Nomura Financial Advisory and Securities (India) Pvt. Ltd expect “some" improvement in the second half of the festive season, which falls in November, as fuel prices have been cut across the country every day for almost a fortnight.

Additionally, about 65% of festive season sales are accounted for by the second half of the season, said Kapil Singh and Siddhartha Bera in a 30 October note.

“In case that (improvement) does not happen, there will be further risk to volume growth in coming months," they added.

Gandhi at Crisil said despite a better kharif output, farm profitability remains a key monitorable over the coming months, which could meaningfully impact rural sentiments. She expects demand during this festive season to remain muted as compared to the year-ago.