UPDATE 2-India car makers post lacklustre May sales

* Maruti, Ford, GM post lower car sales in May
* Worrying sign as economic gloom deepens
* Sector struggling with high costs and tax hike
* Diesel models help Mahindra post 27 pct rise in sales

(Adds comments from industry group)
By Henry Foy
MUMBAI, June 1 (Reuters) - India's top car makers posted
lacklustre sales in May as an excise tax hike and rising fuel
prices hit demand, casting more gloom over the country's
economic outlook.
Car makers are struggling to hit a sales target set by the
local industry body as India's economy grows at the slowest pace
in nine years, hurting an industry that has been one of the
country's best performers over the past decade.
"Things are not looking good," said Sugato Sen, senior
director of the Society of Indian Automobile Manufacturers
(SIAM), which has forecast 10 to 12 percent sales growth in the
fiscal year to March 2013. "We did not expect that sales would
be so low. The economic sentiment is not positive."
Maruti Suzuki, the biggest car maker with a 45
percent market share, said passenger car sales fell 5.9 percent
from a year earlier. Tata Motors, the country's No.3,
posted a 6 percent increase.
Ford, which manufactures cars in India, said its sales
in the country fell 14 percent. General Motors reported a
27 percent slide in sales. TVS Motor, the country's
third-largest two-wheeler manufacturer, said its sales declined
4.8 percent.
The government raised petrol prices by around 11 percent
last month, hurting car makers already reeling from an excise
hike announced in the federal budget in March and a weakening of
the rupee that is jacking up import costs.
India's economy grew 5.3 percent in the first three months
of 2012, compared with 9.2 percent a year earlier, with the
manufacturing sector contracting 0.3 percent.
Car sales in the country rose 30 percent in 2010/11,
attracting billions of dollars in investment from automakers
such as Ford, Nissan and Renault. But a
slowing economy dragged sales growth down to 2.2 percent in the
last fiscal year.
Mahindra & Mahindra, the country's top utility
vehicles maker, said this week that due to "continued weakness
in the domestic macro environment, the near-term outlook for the
economy is quite challenging."
Mahindra's car sales rose 27 percent in May, mainly thanks
to its all-diesel range. Demand for diesel cars has doubled over
the past year to around 40 percent of sales due to subsidies
that make the fuel around half the price of petrol.

(Reporting by Henry Foy; Editing by Ryan Woo)