* Forecast of 10-12 pct growth might need revising down
* Passenger car sales down 5.7 pct in August
* Rising cost of raw materials forcing automakers to review
* Toyota to raise prices, GM, Honda to review
(Wraps automaker comments, adds details, quotes)
By Anurag Kotoky and Devidutta Tripathy
NEW DELHI, Sept 7 Demand for cars in India is
likely to slow more than predicted as high interest rates and
rising costs bite, while automakers mull price hikes that could
further stifle purchases in the world's second-fastest growing
auto market after China.
Car sales in Asia's third largest economy, which grew at a
breakneck 30 percent in the last fiscal year, are seen growing
by just 10 to 12 percent this year to end-March, an industry
body said, down from an earlier forecast of 16 to 18 percent.
That makes grim reading for an industry struggling to cope
with rising raw material prices, as more automakers join the
ranks of firms reviewing their prices.
Japan's Toyota Motor Corp will raise prices on most
models by 1.5 percent to 2 percent with effect from Oct. 1, an
executive said on Wednesday, while General Motors Co's
India unit will review its prices this month, its head said.
"Though there is a slowdown in the market, raw material
prices are not coming down. Rubber and steel prices have
stabilised to some extent but other material prices are still
very high," Karl Slym, managing director of GM India, told
reporters on the sidelines of an industry conference.
Rising input costs have created a fresh headache for
automakers, with many firms watching input costs closely as they
mull potential price rises, fearful of pinching sales volumes
even further at a crucial time.
"There are cost pressures happening from all sides," said
Prakash Telang, managing director of Tata Motors ,
which saw car sales fall 34 percent in August compared with a
"We'll have to see and wait and watch what's
happening in the market place," Telang said, adding that
production had been cut for certain models.
Honda Motorcycle & Scooter India, a unit of Japan's Honda
Motor Co , will review its motorcycle prices in October,
its marketing head said on Wednesday.
SALES HIT SPEED BUMP
Passenger vehicle sales, which include cars, vans
and sport utility vehicles, fell 5.7 percent in August, the
second drop in two and a half years, the Society of Indian
Automobile Manufacturers said on Wednesday.
The Indian auto market, which saw a 15.8-percent decline in
July, is driven by a burgeoning and aspirational middle class
that relies on bank loans for purchases.
But India's central bank has raised interest rates 11 times
since March last year in an effort to battle stubbornly high
inflation, a move that has hurt credit-based purchases.
"While we hope that the industry achieves the overall growth
forecast...we may have to revise growth projection for passenger
vehicles and commercial vehicles further," Pawan Goenka,
president of SIAM, said on Wednesday.
Demand has also been dented by high fuel prices, with many
first-time buyers plumbing for motorcycles or scooters.
Car sales in neighboring China, which grew 33 percent last
year, are also slowing after the government stripped away most
of its incentive policies. Chinese auto sales are forecast to
grow at roughly 10 percent annually until 2015.
Still, China sells as many cars in an average month than
India sells in a year. Despite comparable populations, China's
car sales reached 13.8 million in 2010, while Indian sales
totaled 1.9 million in the last fiscal year.
FESTIVE CHEER, RISING COSTS
Sales in coming months are expected to be buoyed by India's
festive season, which starts in early September and peaks in
November after the Hindu festival of Diwali, when it is
considered auspicious to buy big-ticket items and when most
people get their annual bonuses.
Many automakers also offer discounts at this time of year,
leading to a pickup in sales, which could return to double-digit
growth by January, Goenka said.
"We all hope the festival season will mark a recovery for
the passenger car segment," he said.
Car sales in August were dragged lower by Maruti Suzuki
, which sells nearly half of all passenger cars in
India and saw its sales drop by 19 percent in August, marking
its third decline since December 2008.
Output at Maruti, majority-owned by Japan's Suzuki Motor
Corp , was also partly hurt by ongoing labor unrest that
has now led to a production loss of about 4,000 cars.
Tata Motors, India's largest maker of trucks and buses and
the manufacturer of the Nano, touted as the world's cheapest car
and meant to target families of four on motorcycles, saw Nano
sales plunge 85 percent in August from a year earlier.
Foreign automakers, however, continued to post rising sales,
driven by exports. Many are also relatively new entrants to
India and enjoy lower bases of comparison.
The Indian unit of Toyota posted an 84 percent-rise in
August sales, driven mainly by its Innova and Etios models.
Nissan Motor Corp saw sales rise 11 percent.
Several global automakers in India such as Toyota, Ford
Motor Co , Volkswagen (VOWG_p.DE), Nissan and GM are lining
up new models and boosting investment in the country, with a
focus on exports.
(Writing by Henry Foy in MUMBAI; Editing by Jui Chakravorty)