Auto companies lowered growth forecast amid high interest rates

Indian auto companies have lowered the passenger car sales growth projection to 2-4% for the current financial year 2011-12 compared to earlier projection of 10-12% because of lower demand. The recent data published by Society of Indian Automobile Manufacturers (SIAM) has showed that the car sales dropped to 1.8% for the last month of September.

The main reason behind this lower demand was the high interest rate and high fuel prices. The RBI has hiked interest rate 12 times since March 2010 to tame inflation but inflation is not showing any sign of cooling down. Government has also increased petrol prices significantly in last one year because of high global crude oil price to reduce mounting oil subsidy bill amid current financial crunch and rising fiscal deficit. High interest rate and high fuel cost have prompted the consumers to delay their car buying plans and reduced the overall demand significantly.