New Delhi, 12 January 2009: According to SIAM figures, domestic car sales declined by 7% in December, the fifth drop in six months as scarce finance and a slowing economy dented demand in the traditionally weak month.

Carmakers sold 82,105 units in the month, below the 88,272 sold at the same period an year ago.

According to Mr.Sugato Sen, Senior Director, SIAM, "The decline in two wheelers and passenger vehicles is because of finance and sentiment. Finance costs have not come down. If that becomes more congenial, people will start buying".

The cost of automobile loans remain high despite hefty cuts by RBI in its main short-term lending rate, which now stands at an 8½ year low of 5.5%.

"On cars it is 14-17%, about 0.5% less than in October," Mr.Sen said. "For two wheelers, its is 24-26% more than in October."

Sales of motorcycles fell 23% to 3,35,820 units in December on lack of financing options in a market where the bulk of bikes are purchased on loans.

A weak jobs market and muted pay hikes have also contributed to falling demand.

Sales of trucks and buses slumped 58.3% to 17,920 units, the sharpest fall in 12 years, tracking sluggish economic activity.

The country's growth is widely seen slowing to around 7% in the year to March, down from the 9% or more expansion seen in the past three years.

"This is not due to finance alone. The economic activity has to improve. There is no other way," Mr.Sen said.

India has announced a series of steps to boost the flagging economy, including reducing a tax on manufacturing, but Mr.Sen said the pace of their implementation was critical.

"The recovery will depend upon the implementation of the stimulus package," he said.

Sales in December are traditionally low as people prefer to wait another month to buy a car, because a vehicle registered in the new year would have a better resale value.