Passenger car sales in the country, already witnessing a slowdown, may get further bogged down in case of a hike in fuel prices or hardening of interest rates, credit rating agency ICRA has warned.
ICRA, which reviewed the performance of the Indian automobile industry till August-end this fiscal, pointed out that sales in the first five months had already been impacted by several factors.
"The sales growth of the passenger car industry during the first five months of FY06 was impacted by various factors such as increase in vehicle prices by select players, increase in fuel prices, introduction of VAT and floods in select regions," it said.
Car sales during the April-August '05 period managed to grow only in single digits, year-on-year, up 5.3 per cent at 3,32,159 units.
Sounding a note of caution in its outlook, ICRA said, "In the short term, any increase in vehicle prices, indications of hardening of interest rates and further increase in fuel prices are the key risk factors that may impact growth rates in domestic sales volumes of passenger cars."
The rating agency said the growth in the domestic sales of passenger cars was led by strong volumes reported by compact and mid-size segments even as the mini-segment reported a sharp 34.6 per cent decline during the period under review.
Share of compact cars in the domestic car sales increased from 59.7 per cent in April-August'04 to 64.9 per cent in the same period this fiscal, while mid-size increased from 20.5 per cent to 22 per cent even as the share of premium car remained stagnant at 0.7 per cent.