NEW DELHI—India’s passenger vehicle sales retreated to a sluggish pace in January as an increase in vehicle prices due to the rollback of excise tax breaks and year-end discounts crimped demand.
Sales of new cars, sport-utility vehicles and vans grew 3.2% from a year earlier to 230,619 autos, showed data issued Tuesday by the Society of Indian Automobile Manufacturers. Nine of the 13 car makers posted lower sales.
January’s pace trailed the 12% growth in December.
Vishnu Mathur, director general of SIAM, said December’s strong performance was driven mainly by consumer concerns that the government would allow the tax break—a reduction in the factory-gate taxes on vehicles—to expire at the end of that month. Price discounts offered by car makers to clear year-end stocks also supported demand in December.
The government had temporarily lowered excise taxes until last year. While these helped boost sales, concerns remain that demand could taper off because the tax break has now ended.
Mr. Mathur said consumer loan rates are still high, although lower fuel prices are helping.
Sugato Sen, deputy director general of SIAM, said car sales may remain subdued in February and March on consumer expectations that the government may reduce taxes across industries, including on automobiles, in the federal budget to be unveiled later this month.
The industry body reiterated its forecast for passenger vehicle sales to grow up to 5% this fiscal year through March. They grew 3.6% in the first 10 months of the year to nearly 2.13 million autos.
The SIAM data also showed sales of medium and heavy commercial vehicles grew 37% in January to 21,363 autos, thanks to increased freight movement and a bounce back from last year’s weak sales.
Source: Wall Street Journal