India Car Sales Hit Record in January

Car sales in India rose 26% over a year earlier to a monthly record in January as rising personal income in a growing economy bolstered demand in Asia's third-biggest automobile market.
According to data issued Wednesday (February 9) by the Society of Indian Automobile Manufacturers, an industry lobby group, auto makers sold 184,332 passenger cars in January, compared with 145,971 units a year earlier. That beat the previous all-time high sales of 182,992 cars last October.
Sales rose despite price hikes by companies such as Maruti Suzuki India Ltd., Hyundai Motor Co. and Volkswagen AG in the past month to offset higher raw-material costs.
The Indian automobile market weathered the global economic downturn better than the rest of the world, as new models and easy bank loans encouraged people to spend more on new vehicles.
Companies such as Ford Motor Co., Volkswagen, General Motors Co. and Nissan Motor Co. have aggressively expanded in India to offset a slump in their traditional strongholds, the U.S. and Europe, while Indian companies such as Maruti expanded their portfolio and capacities to take on increasing competition.
Consultancy firm J.D. Power and Associates expects growth in the Indian market to continue.
"We believe that the Indian market is all set for another record year in 2011," helped by strong fundamentals such as an expanding economy, higher personal income levels and the development of the country's roads, Darius Lam, a senior market analyst at J.D. Power, said in a recent report.
He said the consultancy expects total passenger vehicle sales to rise to 3.16 million units in 2011, up 17% from 2010.
But, Sugato Sen, a senior director at the manufacturers' body, said rising interest rates, accelerating inflation and higher raw-material costs would likely moderate growth in the next financial year, starting April 1.
India's central bank has raised its short-term rates seven time in the past one year, and is expected to tighten its policy further as inflation remains high. Commercial lending rates, which remained largely unaffected until recently despite the policy steps, have now started rising, also driven by a cash shortage in the banking system.
Still, customers may buy more vehicles in February, fearing another price rise in March after the government's budget presentation, Mr. Sen said. "People are anticipating an excise tax hike [in the federal budget] and that will increase prices of some models significantly."
In January, sales of Maruti, the leader in India's car market, rose 20% to 84,318 cars. The local unit of Suzuki Motor Corp. raised prices by 1,000 rupees-10,000 rupees on some models as cost of rubber and steel rose.
Mahindra & Mahindra Ltd., India's top sport-utility-vehicle maker by sales, also raised its vehicle prices by up to 2.5%, while Tata Motors Ltd., the country's biggest vehicle
maker by total sales, increased prices of its commercial vehicles by 1,500 rupees-30,000 rupees and of passenger vehicles by 3,000 rupees-15,000 rupees in January.
Mr. Sen of the manufacturers' body said exports in the current financial year may fall short of target, owing primarily to a slowdown in Europe. "We were targeting passenger vehicle exports of more than 500,000 this year ... But, I don't think we will be able to meet that."
Passenger vehicle exports in April-January fell 3% to 358,583 units from 369,180 a year earlier.
India's commercial vehicle sales during January rose 13% to 60,753 units. Tata Motors sold 35,831 commercial vehicle, up 15%, while Ashok Leyland Ltd. posted an 8% fall in sales to 6,880 vehicles.
Two-wheeler makers like Hero Honda Motors Ltd., Bajaj Auto Ltd. and TVS Motor Ltd. sold 747,818 motorcycles in January, a rise of 15%. Scooter sales rose 30% to 180,072 units.
(The Wall Street Journal, February 9, 2011)