MUL may fail to match last year's performance

Maruti Udyog, the country's biggest carmaker, may not be able to match last year's sales growth as higher interest rates curb demand in Asia's fourth biggest automotive market.

It will be "difficult" for the company to equal the growth rate of FY07, Jagdish Khattar, managing director of the New Delhi-based unit of Suzuki Motor Corp, said in New Delhi today. Maruti's sales in the first quarter grew 17 per cent, slower than the 20 per cent recorded for the financial year ended March 31.

Demand for cars and motorcycles have slowed in India as interest rates at a five-year high make it dearer for people to borrow in a nation where four-fifths of vehicles are bought on credit. India's central bank has raised the benchmark overnight lending rates six times in the past 1 1/2 years to cool inflation making it costlier to buy consumer goods on credit.

Khattar said he doesn't expect Maruti's sales to erode when Tata Motors, India's third-biggest carmaker, starts selling a car for less than $3,000, making it India's cheapest car.

"Our engineers have told us that it's difficult to make a car at that price," Khattar said. "It should not affect" the sales of Maruti's small cars because the models will be different in terms of size, engines and speed, he said.