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Firms sold 99,738 passenger cars in June, with sales growth sharply slower than the 14.3 percent seen in May and 17.2 percent in April, data released on Thursday by the Society of Indian Automobile Manufacturers (SIAM) showed.
It was also well below the 16.4 percent expansion seen in June 2007. Car sales in the April-June period have risen 12.4 percent, flat with the 12.7 percent growth in the year-ago period.
Car makers have offered discounts to boost demand in a competitive market, but rising costs of raw materials like steel have squeezed margins.
"People were trying to boost sales by discounts," Sugato Sen, senior director at SIAM, said. "Margins are under pressure (now), so discounts and other incentives are drying up."
Demand has also been dented by double-digit inflation in the country, rising interest rates and higher fuel prices, Sen said. Inflation is at a 13-year high, and the central bank has raised its key lending rate to the highest in more than six years in response, bumping up rates on automobile loans.
State-set fuel prices were hiked by about 10 percent in June after global crude oil prices surged to record highs. Sen forecast sales would remain flat in the next few months and said some firms could cut down on production.
Sales of commercial vehicles rose 13.5 percent to 40,324 units in June, chiefly on large bus orders from state-run transport firms, Sen said.
Motorcycle sales rose 8.3 percent to 473,899 units in the month. Bike sales have revived this year, following a 11.9 percent fall in the year to March 2008, and analysts expect them to be more attractive to customers as they have lower operating costs than other vehicles
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