By Aradhana Aravindan and Aditi Shah
Sept 2 Domestic sales for two big Indian
automakers tumbled in August on rising fuel costs and interest
rates, and the industry looks set for more pain as a sharply
weaker rupee hits profit margins during key sales months ahead.
The data comes after industry-wide car sales declined for
nine straight months to July and as some automakers move to
curtail production and reduce labour costs.
Tata Motors Ltd said local vehicle sales fell 33
percent last month, while passenger car volumes at Mahindra and
Mahindra Ltd, the country's largest sport-utility
vehicle maker, slid 28 percent.
Passenger vehicle sales at Maruti Suzuki India Ltd
, the country's biggest carmaker by market share,
doubled in August but that was mainly a reaction to a weak month
last year when labour unrest resulted in a factory shutdown.
With a darkening economic picture forcing automakers to
operate below capacity levels, Mahindra has let go about 1,000
temporary and contract workers over the past two months and said
it would be observing up to six "no production" days per month
at its automotive plants in the months ahead.
Maruti Suzuki is adjusting its number of temporary workers
to reflect weak production but declined to give further details.
Big-ticket sales usually pick up in India in September, the
beginning of the festive season which runs until the end of the
year, and carmakers like Volkswagen AG and Nissan
Motor have rushed to launch new or refreshed models.
But a plunging rupee is exacerbating problems in the
industry. The rupee has tumbled nearly 17 percent since the
beginning of the year and the fall in August was the biggest for
any month on record.
With the industry heavily reliant on imported auto parts,
some foreign automakers, such as General Motors Co and
BMW, have moved to raise prices and more are expected
to follow suit, providing new deterrents to spending.
"Original equipment manufacturers will face margin pressures
given the increase in import costs," said Yaresh Kothari, an
auto analyst at Mumbai-based Angel Broking.
"As of now they have resisted from increasing prices but
probably they will have to increase the prices to mitigate the
Some local auto executives have called for government
"Immediate action by the government is needed so as not to
lose out on the upcoming festive season wherein sales could look
up and bring some cheer for the auto industry," Pravin Shah,
head of Mahindra's automotive division, said on Sunday.
India and Indonesia have been hit worst by capital outflows
from emerging economies as markets price in a tapering of the
U.S. Federal Reserve's bond-buying stimulus.
They are the only countries whose automobile sectors have
witnessed a fall in share prices this year, according to Reuters
StarMine data. The Indian auto sector is down 7.9 percent for
the year to date, compared to an average 20.7 percent climb for
global auto stocks.