Tata Nano Tata Motors Showroom Mumbai India
A showroom attendant cleans a Tata Nano car at the flagship showroom in Mumbai.Reuters

Indian automakers are betting on the biennial New Delhi auto show this week to revive sales in Asia's third-largest auto market, where an economic slowdown has hit car sales.

Auto sales in India are headed for their first drop in 12 years. As such, market leader Maruti Suzuki India and rivals Tata Motors, Ford, Honda and Nissan are all showcasing new models, in a bid to entice reluctant buyers.

However, manufacturers face an uphill task. The Indian auto market is contracting at a time when inflation is high, loans are expensive and government intervention is ruled out ahead of general elections due in May.

India Passenger Vehicle Sales
Charts showing India's passenger vehicle sales and market share by manufacturer.Reuters

The economic slowdown has compelled consumers in India, the world's largest market for hatchbacks, to turn to small cars.

About two-thirds of all purchases are financed through loans, and higher borrowing costs could force buyers to put off purchases.

Hatchbacks accounted for 55% of the 1.8 million passenger vehicles sold in the country in the nine months to December 2013. As such, smaller cars and compact SUVs are to invade the five-day motor show when it opens on 7 February.

New Cars

Maruti, majority-owned by Japan's Suzuki Motor, proposes to roll out the Celerio hatchback, an unnamed concept SUV and a sedan.

Tata will showcase its Bolt hatchback and Zest sedan, unveiled on 3 February. The carmaker, which is grieving over the sudden death of managing director Karl Slym, will also put on display an upgraded version of its $2,300 (£1,407) Nano car.

Ford Motor will display a compact concept sedan.

Nissan Motor's low-cost Datsun brand will display a prototype of a hatchback that will compete with Maruti's best-selling Alto minicar. Nissan will also unveil production versions of the Go hatchback and minivan.

Honda Motor will unveil the Jazz hatchback, a crossover concept called Honda Vision XS1 and the Mobilio minivan.

"The only way to turn things around is if people are excited by the new models and concepts at the Auto Expo, which is why the show is crucial," said Deepesh Rathore, director at Emerging Markets Automotive Advisors in New Delhi. "Slym's untimely death will be a sad overhang," he told Bloomberg.

"A lot of new models are being showcased by everybody with the hope that this will create excitement and spur customers to want to own a car," said Jnaneswar Sen, Honda's India sales chief.

"Whether this will boost demand or not, I don't really know," Sen told Bloomberg.

"I don't think a 25 basis point hike or cut will make that much of a difference," said Sugato Sen, the deputy director general of the Society of Indian Automobile Manufacturers (SIAM), referring to the central bank's recent decision to hike interest rates.

"What will have a difference will be 1 percentage point change. That can impact sentiment," SIAM's Sen told the news agency.

Expensive Loans

India's central bank unexpectedly raised its policy interest rate in January, in a bid to rein in inflation and defend the rupee from the volatility that affected emerging markets recently.

The Reserve Bank of India (RBI) raised its benchmark interest rate to 8% from 7.75%.