Passenger vehicle sales posted its steepest fall in 18 years in May amid weak demand, a liquidity crunch and an economic slowdown, Mint reported on Tuesday.

Sales fell 20.6% in May to 2,39,347 vehicles compared to a year earlier, according to data released by the Society of Indian Automobile Manufacturers. This is the biggest fall since September 2001, when sales had declined 22%. This is also the seventh straight drop in monthly domestic passenger vehicle sales.

The decline in factory sales, which are vehicles sold by manufacturers to dealers, was recorded in all categories except light commercial vehicles, the Hindustan Times reported.

“These things happen only because of an economic slowdown; the dip in sales began after the Kerala flood last year and the industry started swinging in the negative direction after the highest-ever increase in fuel prices,” said Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers or SIAM.

In the passenger vehicle segment, sales fell 26% in May to 1,47,546 units as against 1,99,479 units sold in May 2018. Sales of utility vehicles and vans fell 5.6% and 27%, respectively. Commercial vehicle sales declined 10% in May to 68,847 units. Vehicle sales across categories registered a decline of 8.62% to 20,86,358 units from 22,83,262 units in May 2018.

Top carmakers like Maruti Suzuki India and Mahindra and Mahindra Ltd have temporarily closed some factories to trim mounting stocks at dealerships and factories in view of the weak retail demand, Mint reported.

Earlier this month, Maruti Suzuki reported a 22% decline in its May sales, while Toyota Kirloskar Motor announced a 6.3% decline in its vehicle sales in May.

Some car dealers have been unable to boost inventory as banks and lenders are cutting back on credit. The credit problem has been attributed to a crisis in the Non-Banking Financial Company sector.

“While the wholesale data continues to drop, the dimension of this downturn is now moving beyond the regular reasons such as negative consumer sentiments, fuel price volatility, increased insurance costs and others,” said Deputy Director General of SIAM Sugato Sen, reported Mint. “It is time when government intervention is required in the form of demand stimulus and tax rationalisation.”