Automobile sales declined by 17.98 per cent in November, the worst monthly drop in seven years, led by a dismal performance of commercial vehicles and passenger cars, which dipped by 50 per cent and 24 per cent respectively, according to figures released by the Society of Indian Automobile Manufactures (SIAM). Two-wheeler sales, which slumped by 15 per cent, also added to the gloom.

This is the second consecutive month that auto sales have declined -- October registered a 14 per cent fall -- pushing sales of automobile companies in the negative territory.

The poor performance of automobile companies was because of multiple factors like high interest-rate loans, non-availability of credit and an overall slowdown in manufacturing, among others.

NOVEMBER HEAT
	November		% change
Category	2007	2008
Commercial vehicles	40,466	20,637	-49.52
Passenger vehicles	130,927	99,983	-23.71
Three-wheelers	30,124	23,159	-23.12
Two-wheelers	665,181	567,502	-14.68
Total	866,698	711,281	-17.89
Source: SIAM

In March, SIAM had estimated growth of about 10-12 per cent for cars, 5-7 per cent for commercial vehicles and 4-6 per cent for two-wheelers for 2007-08, projecting the total growth in auto sales at about 10 per cent.

However, the economic downturn, has forced SIAM to revise its growth projection downward to about 7 per cent for the current financial year. SIAM said even this growth figure would be scaled down in coming months should the bearish conditions prevail.

"If banks and other financial institutions act according to RBI directives and disburse credit, if infrastructure creation happens and the fiscal stimulus by the government takes effect as expected, you might see a perceptible improvement in demand for vehicles in January or February next year, assuming all things are equal," said Dilip Chenoy, director-general, SIAM. SIAM sees automobile sales dipping by about 25 per cent in the quarter ending December 2008 and a further drop by around 34 in the quarter ending March 2009.

Analysts said the combined effect of lower prices (as a result of the 4 per cent Cenvat cut), the sixth Pay Commission recommendations and new launches like Maruti's [Get Quote] A-Star and the anticipated interest rate cuts on car loans by banks will result in a pick-up in demand from January. SIAM expects the car industry sales either to close flat or slightly in the negative by the end of March 2009.