India car sales slow in May

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Indy Lifestyle Online

Leading Indian carmaker Maruti Suzuki on Wednesday reported flattish growth in sales for May, with the pace slackening for the second month due to rising input costs, fuel hikes and costlier loans.

India's largest passenger car maker by sales showed a 1.9 percent rise in total vehicle sales to 104,073 units in May from a year earlier.

The New Delhi-based, Japanese-controlled company saw sales in April rise 4.4 percent year-on-year, down from a 28 percent increase in March.

South Korean rival Hyundai Motor India showed a similar weakening of growth in the past two months. Sales rose two percent in May to 47,766 from a year earlier. In April, growth was negligible at less than one percent.

General Motors India said it sold 8,329 units in May, up 1.3 percent year-on-year, describing the growth as "marginal".

Tata Motors, though, bucked the trend, with domestic commercial vehicle sales - seen as a barometer of economic health - rising 19 percent to 37,361 in May, a similar amount to the previous month. Year-on-year, sales were up about eight percent.

US giant Ford's subsidiary, Ford India, also posted a 19 percent rise in sales from April to May, from 7,319 to 9,046, led by strong sales of its Figo model. Sales were up 10.6 percent year-on-year.

The US giant is planning to invest $72 million to boost capacity at its Chennai engine plant in southern India to meet demand for diesel-powered vehicles.

India, where just one in 10 households in urban areas owns a car and one in 50 in rural areas, is the world's fastest-growing car market.

Sales grew at a record 27 percent in the financial year ended March 31 to 15.5 million units, the Society of Indian Automobile Manufacturers (SIAM) has said.

But sales are starting to slow after break-neck growth for nearly two years.

"We are seeing a moderation in growth but it appears sharper due to a high-base effect last year," said Mahantesh Sabarad, auto analyst with Fortune Equity Brokers in Mumbai.

The industry expects the pace to slacken this year to between 12 and 15 percent as higher financing, fuel and and car prices - due to soaring steel and other input costs - discourage buyers.

GM India's vice-president P. Balendran said of his company's sales: "The numbers are not on the desired lines as the footfalls in the show-rooms have started coming down.

"Given the hike in interest rates, fuel prices, commodity prices, inflation etc., we expect the market to remain depressed in the coming months as well," he said in a statement.

Sales of trucks and buses have also been slowing on growing concern about an industrial slowdown, due to aggressive monetary tightening and rising interest rates.

Maruti's small car models, including the popular M-800, Alto and A-Star, showed lower monthly sales but mid-sized cars such as the SX4 and D'zire plus the multi-utility-vehicle segments fared better.

India's industrial output rose 7.3 percent in March after growth of double that in the same month last year, as higher interest rates and rising material costs have crimped expansion.

India's annual inflation at 8.66 percent is the highest among all Asian countries and the central bank has hiked interest rates nine times in the last 15 months to bring down the cost of living.



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