After almost three continuous years of positive growth, the Motown car industry fell into negative terrain as sales dipped 1.71% to 87,724 cars this July. During the same month of last year, the industry had a sale of 89,250 cars.

The RBI restrained money supply to stem retail growth and this had an adverse effect on the automobile industry, as it had to face two big problems of high inflation and credit squeeze.

The Society of Indian Automobile Manufacturers (SIAM), expressed its concern and said that the rise in the fuel prices and high interest rates has limited the demand of the cars so badly that it may adversely effect the industry’s target of tripling annual sales to 3-million vehicles by 2016.

“Auto sales are impacted by the government measures to contain inflation. We are positive on the 3-million targets, but at prevailing conditions, it might be an arduous target,” said SIAM director-general Dilip Chenoy in Delhi. As of FY08, the Indian automobile industry has clocked a 12.17% growth in sales to 15.47-lakh vehicles.

The car companies saw a biggest slowdown in the sales of their cars. As many as 13 major car companies have posted negative sales for the month of July. Tata motors, the country’s third largest carmaker company were the most affected as its sales dropped 8.9% to 12,012. Other than this, Honda Siel Cars India, the nation’s fourth largest carmaker too saw a downfall whose tally fell 7% to 4,006 units in July. A miniscule of 0.1% increase in sales to 52,911 in July was posted by the car market leader, Maruti Suzuki India.

The sales of the Passenger vehicles too dipped to 10.97% for the first four months from 15% growth in the first three. Vaishali Jajoo, Mumbai-based auto analyst at Angel Broking Ltd reported, “Higher interest rates are hurting demand. Sales will slow down further in the next six months and we may end the year with just single-digit growth.”

Two-wheelers however saw an increase in its sales. It had a positive growth in its sales of 19.47% to 5.99 lakh compared to 5.01 lakh in the same month last year. Hero Honda benefited the most as its sales increased by 40% to 2.72 lakh in July against 1.94 lakh in the year-ago month.