New Delhi: Car sales in India hit a record high in February, driven by a burgeoning middle class and easier access to loans, but higher input costs and a likely hike in interest rates are seen denting sales growth in coming months.
Asia’s third-largest economy, with its near 9% growth, remains attractive for automakers and global players have increasingly relied on growth in China, India and the like to offset slowing sales in their home countries.
However, a likely rise in interest rates, fuel prices and a jump in input costs due to higher global commodity prices remain concerns for the automotive sector.
“There is moderation happening which was expected. This moderation will continue over a period of time because high growth is difficult to sustain,” Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers (Siam) said.
Vehicle manufacturers will have to rationalize prices at some point of time as interest rates and commodity costs were going up, Mathur said.
The Reserve Bank of India (RBI) has raised interest rates seven times since March last year to tame stubborn inflation and is seen raising rates further, hurting demand for financing-reliant industries such as the automotive and the real-estate sectors.
Indian automakers sold 189,008 cars in February compared with 154,132 in the year ago period, according to data from Siam released on Wednesday.
Sales of trucks and buses, a key pointer to economic activity, rose 10.5% to 64,057 units in February, it said.
Sales at India’s largest car maker, Maruti Suzuki, rose 15.5% in February from a year ago, while sales at Tata Motors grew 12% and Mahindra & Mahindra sales rose 20%.
Sales of the Tata Nano, touted as the world’s cheapest car, doubled in February to 8,262 units.
Shares of Maruti Suzuki rose more than 2%, while those of Bajaj Auto climbed 1.4% after the data was released.