Sales in India fell 15.8 percent in July, the first drop in two-and-half years, and higher interest rates and rising vehicle costs are expected to keep demand subdued for the next few months.
A mild rebound is on the horizon in China, auto executives and analysts say.
Traffic to auto showrooms would be on the rise again in September and October, the peak months for automakers, when sales normally top the average monthly pace.
"Autumn has always been the best auto-selling season. Demand will not jump up as sharply as it used to, but a mild rebound is quite likely," said Sheng Ye, associate research director at industry consultancy Ipsos' Greater China region.
In July, a total of 1.01 million sedans, sports utility vehicles and multi-purpose vehicles were sold, according to data provided by the China Association of Automobile Manufacturers (CAAM) on Wednesday.
For the first seven months, 8.12 million vehicles were sold, up 5.9 percent from a year ago.
China's once-sizzling auto market has cooled significantly after the government stripped away most of its policy incentives for the industry at the end of 2010.
In addition, steps to restrict car sales in Beijing and some other cities in an effort to ease ever-worsening traffic gridlock also curbed auto demand in a country whose per capita car ownership is still far below that in developed markets.
The chances of winning in Beijing's mandatory monthly car registration lottery are no better than hitting a number on a spin of the roulette wheel -- slightly less than 3 percent.
In the latest computerized lottery in July, only 17,555 out of a total of 614,441 applicants won the right to register cars. That means the odds have fallen to 35:1 -- about the same as scoring on the roulette table -- compared with 11:1 in January.
In India -- the world's second-fastest growing major auto market but still a fraction of the size of China's market -- sales dropped 15.8 percent in July to 133,747 units, according to data from the Society of Indian Automobile Manufacturers (SIAM).
Demand has also been dented by high fuel prices, with many first-time buyers plumbing for motorcycles or scooters.
"We surely expect the situation to improve from this level, but don't see any significant growth. It should be flat for the next month or two, but we do expect numbers to pickup in the festive season," said Nikhil Deshpande, auto sector analyst at PINC Research.
India's festive season starts in September and peaks in early November after the Hindu festival of lights. Sales typically rise during this period as new purchases are considered auspicious and companies offer discounts.
The drop in July largely reflected a 25 percent fall in sales reported by market leader Maruti Suzuki, as production of one of its popular sedans was crippled due to a shift in its manufacturing facility.
Industry sales growth has been nearly flat in recent months, after jumping 30 percent in the fiscal year ended March to almost 2 million vehicles.
After a disappointing first half during which car sales in China climbed less than 6 percent, down sharply from the year-ago pace of 48 percent, CAAM Secretary General Dong Yang cut his forecast for 2011 nationwide vehicle sales growth rate. [ID:nL3E7I81AQ]
However, some senior foreign auto executives, including Kevin Wale, president and managing director for General Motor's China operations, and Nissan Motor's Chief Executive Carlos Ghosn, remain optimistic.
"We have been systematically wrong on China on the forecast for the past seven years. There wasn't even one year we even came close... And we were wrong on the conservative side," Ghosn told reporters in Beijing late last month after unveiling Nissan's $7.8 billion China expansion plan.
J.D. Power and Associates upheld its forecast for a 9 percent annual growth of China's passenger vehicle sales, its vice president and managing director for China, Jacob George, said in an email.
In July, Toyota's China sales jumped 28.4 percent from a year earlier, rebounding strongly from a 2.4 percent slip in June.
Performance of Nissan's venture with Dongfeng Motor Group Co is equally impressive, reporting a monthly growth of 19.6 percent.
General Motors saw its China vehicle sales fall 1.8 percent in July due to weak mini-van sales, which accounted for 45 percent of its overall tally for the month.