Auto parts sector's growth to halve in current fiscal

India's auto components sector, which had expanded by a breezy 34 per cent last year, is expected to slow down, with growth halving to 12 to 15 per cent in the current fiscal.

"The first quarter of 2011-12 has witnessed some slowdown in vehicle consumption in India and this seems to suggest that the growth in the auto component industry in the current fiscal year will be in the range of 12 per cent to 15 per cent," said Srivats Ram, president, Automotive Component Manufacturers Association (ACMA).

According to ACMA, demand for auto components grew at a robust pace in 2010-11 "in tandem with vehicle sales in the domestic market." Last year, car sales shot up by 30 per cent, the biggest rise in over a decade, to 1.98 million units.

But car sales plunged by 16 per cent in July, the first time it saw negative growth in more than two-and-a-half years. The Society of Indian Automobile Manufacturers has scaled down growth estimates for the current fiscal to 10 to 12 per cent, from an earlier projection of 16 to 18 per cent.

Higher interest rates and soaring fuel costs have impacted demand for passenger cars. The Reserve Bank of India has hiked interest rates 11 times since Mach 2010, resulting in dearer auto loans. The central bank is expected to jack up rates by another 25 basis points in its policy review on September 16.

India economy is also showing signs of deceleration, with GDP growth for the quarter ending June falling to 7.7 per cent, the lowest in six quarters.