According to the Society of Indian Automobile Manufacturers (SIAM), domestic car sales in December last year was 1,41,083 units, 12.5 per cent lower that 1,61,247 units sold in the same month in 2011.
The is the biggest drop since August, 2012 when sales had declined by 18.5 per cent.
"Sentiments have not been improved. Interest rates are still high. Even fuel prices remain on higher side and the economy is down," SIAM President S Nadiya said.
To boost the industry sentiment and growth, SIAM demanded a reduction in excise duty and continuation of all benefits of Auto Mission Plan (AMP) for another 10 years till 2026.
"Going by the current trends, we do not think industry will be able to recover in the fourth quarter unless the government provides support," he said.
He said the excise duty on automobiles, which was increased in the last year Budget, needs to be reduced, particularly on commercial vehicles.
Sandal's asked for early implementation of GSA as the move would help in boost the sector's growth.
"Early introduction of CST will help in boosting the industry's growth. SIAM also requests to look into the possibility of extending AMP till 2026 to further nurture the sector," he told reporters.
The total vehicles sales across categories, however, registered an increase of 2.77 per cent at 14,51,517 units last month as against 14,12,372 units in December, 2011.
The industry body has revised its sales forecast for passenger cars this fiscal to zero to one percent as against an earlier forecast of 1-3 per cent.
According to the data released by the SIAM today, motorcycle sales last month went up by 4.83 per cent to 8,44,113 units from 8,05,198 units in December 2011.
Total two-wheeler sales in December 2012 rose by 4.45 per cent to 11,37,148 units from 10,88,746 in December, 2011.
Sales of commercial vehicles were down by 13 per cent to 62,786 units from 72,166 units in the same period in 2011.
The overall growth in domestic sales during April-December 2012 was 4.57 per cent over the same period last year.
In December 2012, market leader Maruti Suzuki's sales stood at 68,729 units marginally down from 69,329 in the same period of 2011. Rival Hyundai Motor India's sales too decreased to 26,651 units during the reported period as against 29,449 units in the year-ago period.
Homegrown auto major Tata Motors' car sales were down by about 52 per cent at 11, 257 units.
In the motorcycle segment, market leader Hero MotoCorp sales increased to 4,71,873 units in December 2012. Rival Bajaj Auto's sales too went up to 1,98, 394 units during the period.
However, Honda Motorcycle & Scooter India (HMSI) posted 36 per cent increase in sales to 94,700 units, while TVS Motor dispatched 45,106 units, 15 per cent more than December 2011.
The scooter segment's overall sales grew by 6.40 per cent to 2,32,343 units from 2,18,369 units.
HMSI's scooter sales fell to 1,04,537 units compared to 1,10,282 units in December 2011, while Hero MotoCorp sold 55,502 units, up 54 per cent. TVS Motor's sales saw decline of 32 per cent to 28,763 units.
Medium and Heavy Commercial Vehicle sales declined 38.34 per cent to 19,105 units during the month as against 30,984 units in December 2011.
According to SIAM, light commercial vehicle sales grew 6.07 per cent to 43,681 units in December 2012 from 41,182 units in the same month in 2011.
In the three-wheeler category, sales went up 5.91 per cent to 44,718 units.
SIAM expects that overall sales will go up in the last quarter of this fiscal.
Further Sandilya said issues like high finance rates for vehicles and differential excise rates are affecting the growth of the industry.
He asked the government to take steps in the forthcoming Budget to further fuel the growth of the sector.
Suggesting steps, he asked the Finance Minister to reduce excise duty besides taking steps to improve basic infrastructure and further liberalising mining sector.
He also asked the government to restore drawback rates for auto sector in order to boost its exports.
During April-December 2012, overall automobile exports declined by 2.92 per cent to 21,86,834 units compared to the same period last year. However, in December 2012 exports grew by 11.17 per cent at 2,61,732 units.
SIAM also suggested the government to reduce excise duty on cars other than small cars to 20 per cent and said that the duty on 10- 13 seater vehicles should be at par with buses that is 10 per cent.
SIAM president Sandilya asked for concessions on identified parts of hybrid/ electric vehicles.
To revive commercial vehicles segment, he demanded Jawaharlal Nehru National Urban Renewal Mission (JnNURM) -II scheme for city buses. He said that the government should strictly enforce the legal provisions against overloading.
Further he added that high taxes on small cars and other vehicles are impacting the growth of the sector.
The taxes are as high as 57-62 per cent in some states, he said adding taxes on cars (other than small cars) are as high as 76-82 per cent in some states.
He said that if the industry will grow by 10 per cent than also the target of Auto Mission Plan will not be achieved.