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April 9, 2010

INDIA: Optimism over vehicle sales despite price hikes

Indian vehicle sales are expected to reach a record high for the second year running as rising incomes in a rapidly growing economy boost demand, according to the Society of Indian Automobile Manufacturers (SIAM).

Indian vehicle sales are expected to reach a record high for the second year running as rising incomes in a rapidly growing economy boost demand, according to the Society of Indian Automobile Manufacturers (SIAM).

Society president Pawan Goenka said he expected growth of 10-15% provided there were no “major surprises”.

The Indian economy has been projected to expand 8.5% in the 2010/11 fiscal year which began on 1 April. It is one of the few regions in the world where demand for automobiles has been rising at a double digit rate.

In China, the world’s biggest market, passenger cars sales grew by almost 66% last month as buoyant consumer sentiment bolstered spending on big-ticket items, but growth is expected to slow from the current quarter.

In India, sales of vehicles – including cars, utility vehicles, trucks, buses, motorcycles and scooters – rose an annual 26.4% in 2009/10 to 12.3m units, according to SIAM data, surpassing a previous record of 10.1m vehicles in 2006/07.

Car sales were expected to rise on an improving economy and motorcycle makers are increasing capacity in anticipation of increased demand, especially in the popular 100cc segment.

Sales were also expected to be boosted following the recent launch of new vehicles in the compact segment, notably by General Motors, Ford and Volkswagen.

Goenka said sales of passenger vehicles, which include cars and utility vehicles, were expected to rise to 4.5m units by 2015/16 – annual growth of 16-17% – putting the total value of the auto industry there to US$145bn.

Passenger vehicles in 2009/10 rose 25.6% over the previous year to 1.95m units, SIAM said.

Goenka warned, however, that there were risks to vehicles sales such as rising commodity costs, possible increase in taxes, hardening interest rates and new emissions rules which could push vehicle prices higher.

Maruti Suzuki, India’s largest car maker, and utility vehicles specialist Mahindra & Mahindra both raised prices this month, citing higher costs from Euro IV emission reqirements, while, in March, the central bank raised interest rates by 25 basis points and economists expected further hikes as the government battles inflationary pressures.

Car sales in India rose 20.1% last month compared to March 2009 as customers brought forward their purchases ahead of price hikes. Domestic automakers sold 155,600 cars in March, compared with 129,585 a year ago.

Sales of trucks and buses, a barometer of economic activity, rose 61.2% to 67,362 units in the month, SIAM said.

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