Car sales in India fell in the financial year just ended by 6.7 percent.
It is the first time in a decade that they have declined, and only subdued growth is expected this year.
High interest rates, rising fuel prices and prolonged economic gloom have hit carmakers who are now rethinking expansion plans.
Having recently enjoyed growth of 30 percent a year, the industry in India is now having to offer huge discounts, with showrooms full of unsold vehicles, and chronic overcapacity.
Quitting India is not an option for global majors such as Ford and Volkswagen, given its long-term potential from a huge population and rising incomes, but manufacturers are braced for another year of disappointing sales.
“The industry, like the rest of the economy, has slowed down very substantially,” R.C. Bhargava, chairman of market leader Maruti Suzuki said.
While surging sales of SUVs have been a bright spot for some manufacturers, sales of the smaller cars that account for most of the passenger vehicle market have crashed this year.
“Everything has slowed down by two to three years,” Bhargava said. “Everybody has to consolidate their operations, look how to manage with less, do more with less. This recessionary period will force people to be more efficient.”
The drop is the worst since the financial year that ended in 2001, when sales fell 7.7 percent, according to the Society of Indian Automobile Manufacturers.