Car sales in India climbed almost a third in September versus a year, industry data showed on Friday, but growth is seen moderating as borrowing costs rise and as parts makers struggle to meet demand. Automakers such as utility vehicle leader Mahindra & Mahindra and Maruti Suzuki, which produces every second new car sold in the country, have had to curtail production in recent months because of the slow pace of growth in component supplies.
"Post this festive season we may not see a similar pace of growth as to what we have seen in the recent past," Ambareesh Baliga, vice-president of Karvy Stock Broking, said. Demand in India usually rise during the festive season that starts in September and peaks in November after Diwali, the Hindu festival of lights, when most workers get their annual bonuses.
India has raised interest rates five times since March by a total of 125 basis points to clamp down on inflationary pressures and this could make auto loans costlier. "In the (fiscal) third quarter, we expect some moderation in growth because Q3 of last year was one of the best growth quarters for the industry," said Pawan Goenka, president of the industry body Society of Indian Automobile Manufacturers (SIAM).
He forecast the auto sector industry would grow by 18-20 percent in the financial year that ends next March. Still, India is one of the world's fastest growing market for cars as a rapidly expanding economy boosts incomes and consumer spending.