Although domestic car sales grew 15.4% and two-wheelers by 3.8%, all other segments experienced drop in sales during August. Even car sales growth is attributed to low base effect from last year

Notwithstanding the 15.4% growth in domestic car sales and 3.8% increase in monthly sales for two-wheelers, the auto industry continues to slump. This is because the increase in passenger car sales due to low base effect of last year. However, according to industry experts, the growth seen in August is unlikely to be sustained in September and a recovery in the market is likely to happen only in the next couple of quarters, especially during the festive season.

"In August auto volumes grew 7.5% year-on-year (yoy), the first time in seven months. However, except passenger cars and two-wheelers, all other segments experienced a drop in sales from August 2012. We expect the near-term demand weakness to continue through September, while the festival season is likely to lead only to a month-over-month recovery," said Rohan Kurde, auto analyst at Anand Rathi Financial Services, in a research note.

According to data released by Society of Indian Automobile Manufacturers (SIAM), during August, domestic passenger car sales grew 15.4% to 1.33 lakh units from 1.15 lakh units same month last year. The growth was mainly due to low base effect as a result of the month-long lockout last year at Maruti Suzuki's Manesar plant.

Sugato Sen, deputy director general of SIAM, said, "This (growth) is not a reflection of the market conditions. This is mainly due to Maruti Suzuki India Ltd's numbers compared to last year. The tough market conditions still remain. Interest rates are high, fuel prices continue to be high while sentiments are extremely low".

In August, Maruti Suzuki doubled its domestic car sales at 63,499 units as against 31,653 in the same month last year. The company had declared a month-long lockout at its Manesar plant in August 2012 following a violent labour unrest in which a senior executive was killed.

Hyundai Motor India Ltd registered a marginal increase during the month at 28,281 units as against 28,192 units last year. Tata Motors saw its sales plunge by 50.57% to 8,761 units as against 17,727 units during August last year.

India's largest utility vehicle maker, Mahindra & Mahindra, saw its domestic passenger vehicles sales decline by 25.45% to 18,137 units during the month.

According to SIAM data, during August, motorcycle sales grew 3.82% to 7.95 lakh units from 7.66 lakh units in the same month of previous year.

"The good monsoon has had an impact on rural sales of two-wheelers, especially that of motorcycles. We expect this to continue and the rural demand could also have a slight positive impact on car sales," Sen said.

During August, two-wheeler market leader Hero MotoCorp posted 1.61% increase in its domestic sales at 3.95 lakh units. Bajaj Auto saw its bike sales decline by 22.6% to 1.51 lakh units compared with 1.95 lakh units a year ago period. Honda Motorcycle and Scooter India's (HMSI) motorcycle sales jumped 48.68% to 1.44 lakh units as against 96,876 units in the year ago month.