India's domestic car sales growth slowed sharply in January from a year ago, clocking up annual expansion of 9 percent, and analysts said only new models and cheaper loans were likely to fuel a pick up in demand.

India sold 113,899 cars in January, up from 104,501 in the same month a year ago, when sales had jumped 24 percent, data released by the Society of Indian Automobile Manufacturers (SIAM) showed on Friday.

The last few months have seen muted sales and the trend may continue unless new vehicles are introduced and finance issues are tackled, Dilip Chenoy, SIAM's director general, said.

India's central bank raised interest rates five times in 10 months from June 2006, bumping up those on vehicle loans, and tighter monetary policy has trimmed consumer demand in Asia's third-largest economy.

Top carmaker Maruti Suzuki India Ltd, which is 54.2 percent owned by Japan's Suzuki Motor Ltd, posted a marginal fall in car sales to 54,366 units from 54,372 in the year-ago period.

Tata Motors Ltd, India's No. 3 carmaker, saw car sales shrink an annual 13.6 percent to 15,261 units.

The lack of newer models (from Tata Motors) to replace the (compact) Indica and the Indigo (sedan) is hurting sales, investment bank Kotak Securities said in a note to clients.

Kotak added it saw the launch of a new version of the Indica and of the ultra-low cost Nano, billed as the world's cheapest car, boosting sales later in the year.

Sales of both the Indica and Indigo fell in the month, but demand for newer versions of the models were encouraging, Tata Motors had said in a statement.

South Korea's Hyundai Motor Co, the second largest carmaker in India, had a better month, with sales surging 39.2 percent to 24,296 units on year driven by strong demand for its compact i10 car.

Sales of commercial vehicles -- trucks and buses -- stood at 46,788 units in January, down 1 percent from 47,251 in 2007.

Motorcycle sales in the the world's largest bike maker after China continued their downward trend, falling an annual 14 percent to 481,267 units in the month.

Entry level motorcycles, the largest segment, are generally bought on loans, and financing has been costlier and more difficult to obtain since the central bank hiked lending rates.

Top motorcycle maker Hero Honda Motors Ltd saw total sales fall 1.64 percent on year to 290,005 units, while the second largest bikemaker Bajaj Auto Ltd fell 21.6 percent to 148,660 units.

TVS Motor Co Ltd, the third largest player in the sector, saw a 29.6 percent plunge in sales to 80,277 units.

The two-wheeler space continues to bleed as Bajaj, Hero Honda and TVS have all recorded negative growth trend, Kotak said. (Reporting by Rakesh Sharma, Editing by Mark Williams)

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