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Tough road ahead for passenger vehicles?

With automobile prices up, major car makers have reported single-digit sales growth in February

With most major car makers reporting single-digit sales growth for February, there seem to be no signs of an upward trend in demand for passenger cars and SUVs in the domestic market.

Vehicle prices have gone up after the government decided against extending excise duty concession to the industry beyond December. With the Union Budget on Saturday giving no reasons to cheer for the industry, sales are expected to remain subdued. Market leader Maruti Suzuki and its arch rival Hyundai Motor India reported 8% and 9.7% growth, respectively, with the boost coming largely from new cars such as Ciaz and Elite i20. New launches also propelled Honda Cars India's sales that grew by 16%.

However, lower farm incomes due to scanty rainfall in 2014 affected India's largest utility vehicle maker — Mahindra & Mahindra — with a 6.2% decline.

The small-car segment has been hit all the more due to the general gloom in the economy and the high interest rates.

"Reduction in interest rates could bring in the thrust to initiate double-digit growth," said Rakesh Srivastava, senior vicepresident, marketing and sales, Hyundai Motor India.

"We expect the market to gain momentum only if interest rates are reduced to facilitate consumer spending," said P Balendran, vice-president, General Motors.

Lower income in rural India also impacted sale of motorcycles that have declined in the last few months.