Indian car market faces headwinds At the launch of his Evalia people carrier in Mumbai recently, Takayuki Ishida, chief executive of Nissan India, was unmoved by talk of trouble in the Indian car market. "In the short term, there is some fluctuation," said Mr Ishida who moved to the auto-hub of Chennai this year. But in the long term, definitely, this market will continue to grow hugely. Few analysts disagree that India is poised to join China and the US in what Booz Allen, the consultancy, dubs a future "global automotive triumvirate." But such talk cannot disguise the fact that 95 per cent of Indian households still do not own a car, according to the 2011 census. Meanwhile, the car market is suffering an unusually sharp slowdown. Falling sales in August raised alarm when economic weakness combined with rising fuel and financing costs and import tariff rises sent output down by 19 per cent year on year. Violence played a part too. Maruti Suzuki, India's leading carmaker by revenues, suffered from a month-long shutdown following industrial unrest at a factory near New Delhi - although analysts say August's figures would have fallen even if Maruti had been operating at full tilt. The country's leading seven carmakers continued to struggle in September even as the festive season - which is traditionally a time to make big purchases - began, with sales rising 0.6 per cent, according to preliminary data from the companies. That figure was strongly supported by Maruti Suzuki, which saw a 12.7 per cent increase in sales over the same month last year, as production came back online after the labour unrest. South Korea's Hyundai, which is India's second-ranked carmaker by revenue, also saw a dip in sales in August. Others, including third place Tata Motors, are now cutting production, while slowing overall demand led analysts at LMC Automotive recently to downgrade their annual sales forecast to 2.5m - a healthy 11 per cent increase, but well down on the speedy 30 per cent growth posted two years ago. Many manufacturers believe sales will pick up after two major forthcoming Hindu religious festivals, during which devotion and car-buying often happily coincide. Salil Mayekar, a salesman in Mumbai for Toyota, says the religious period is "an auspicious period to buy cars." There are other signs of optimism too, not least in the market for diesel cars. India's government raised diesel prices in September, but still offers generous subsidies for fear of offending farmers and truck drivers. This penalises petrol motors. Sales of petrol cars fell 15 per cent in July, while diesel sales were up by a quarter. So few were surprised when Honda, which has so far missed out on the diesel boom, said last week it would unveil a diesel car in India by 2014. The fuel bias also partly explains a second trend: the popularity of SUVs, which overtook sedan sales for the first time in September. A favourite of wealthier, urban customers on India's notoriously bumpy roads, their growth has also been helped along by a clutch of new models, notably Renault's Duster, whose aggressive starting price of Rs750,000 ($14,000) has led to brisk sales. The slowdown in growth means many manufacturers are resorting to a more traditional mixture of marketing gimmicks and hard selling to keep sales high. "There is lots of pressure to meet targets," says Rupesh Juwale, a manager at a Hyundai showroom in northern Mumbai. There is more pressure to sell diesel cars now as customers are buying more diesel cars, so targets are higher. The government's recent Rs5 price rise is unlikely to dent diesel's popularity, says Deepesh Rathore, managing director for IHS Automotive in India, but other new policies designed to boost economic growth could pep up sales later this year. Even if they do not, many manufacturers seem content to gaze into the future of a market that analysts say will overtake the US by volume in a few decades" time. This confidence in future expansion explains why so many foreign carmakers are upping investment, despite the current slowdown: Volkswagen, Toyota and Mercedes all unveiled plans to boost spending this month. The sheer scale of India's market will also help domestic manufacturers, like Tata and Mahindra & Mahindra. India is the last Asian emerging market that is likely to be able to imitate Japan, Korea and ultimately China, in building a globally competitive, indigenous domestic auto sector, as a recent analysis by Credit Suisse argued. "India's market is very diverse, and also huge, and it is growing so fast," says Nissan's Mr Ishida, who hopes to double sales this year and launch 10 new models by 2016. The potential is completely different from the mature markets. There is still a lot of room to grow. Additional reporting by Andrea Rodrigues and Neil Munshi