The firm’s data shows that year on year, light vehicle sales in September declined 8% to 248k. Passenger vehicle volumes came down by 3% YoY to 199k, while light commercial vehicles up to GVW 6 tons registered a sharper 24% YoY decrease to 49k.

The industry sold 2.20 million light vehicles (‐11% YoY) in the first nine months, divided between 1.78 passenger vehicles (‐7%) and 421k light commercial vehicles (‐23%).

On a seasonally adjusted annualized rate basis (SAAR), sales in India were at 2.97 million units in September, up from 2.87 million units in August. It also marked the second consecutive month of a modest month‐on‐month increase.

‘The increase (in September) is likely to be a short‐term reprieve; preliminary data for October shows retail sales during the festival season have been weaker than the previous year,’ said Ammar Master, senior market analyst for India at LMC Automotive.

‘We expect OEMs to further trim production through extended holidays and reduced shifts to pare build with market demand. Our forecast for the rest of this year and the first half of 2014 is conservative because of the adverse market conditions,’ he added.

High inflation has urged the Reserve Bank of India to raise its key lending rate (for the second month in a row) to 7.75%.

Also, CPI inflation remains above 10% (10.8% YoY in August) due to a weak rupee (i.e., high costs of imported fuel) and high vegetable prices.

We also think that both business and consumer sentiment is unlikely to significantly improve until after the general elections in April/May 2014 clear out political uncertainty.

Despite much of the gloom in the market, there are some positives. Firstly, a strong monsoon this year is expected to push rural incomes and spending up. The good harvests should also lead to lower food prices.

Goods exports are improving thanks to a recovery in global demand. Export growth (YoY) exceeded 10% for three months in a row through September.

Nonetheless, it is better to err on the side of caution.We forecast 2013 light vehicle sales in India at 2.91 million units, which represents de‐growth of 11% over the previous year. Passenger vehicle sales are estimated at 2.35 million units (‐8%) and light commercial vehicles at 556k (‐23%).

We continue to be positive on the long‐term prospects for India, even though we decided to make a major downward revision to our outlook through to 2020.

The industry is expected to grow at a CAGR of 17% between 2014 and 2020 – by which time sales are forecast at close to 8.18 million units.