Festive season pushes October car sales to record

Festive season pushes October car sales to record

New Delhi: Car sales in India rose an annual 38% in October to record levels, as festive season demand combined with the rapidly expanding economy to pull buyers into showrooms.

Demand in India usually rises during the festive season that starts in September and peaks in November after Diwali, the Hindu festival of lights, when most workers get their annual bonuses.

“We are, by and large, quite enthused by the overall numbers. We maintain a positive view overall," Navin Matta, an analyst with Ambit Capital, said.

Firms sold 182,992 cars in October, while sales of trucks and buses, a barometer of economic activity, rose 18.17% to 50,835 units in October. “We will have a positive bias to commercial vehicles, then passenger vehicles and then two-wheelers, in that order," said Matta.

India’s top car makers like Maruti Suzuki and Tata Motors Ltd have posted better-than-expected profits for July-September, riding on soaring demand.

Apart from the festive season, affordability has also increased significantly, said Vishnu Mathur, director general of the industry body Society of Indian Automobile Manufacturers (Siam).

“If you see how many months’ salary you need to buy a car, it is coming down," Mathur told reporters.

India is one of the fastest-growing markets for automobiles as economic growth forecast at 8.5% in 2010 boosts incomes and drives consumer spending, while a good summer monsoon season spurred auto demand from rural areas.

India’s auto sector is likely to grow by 18-20% in the financial year that ends next March, according to Siam estimates.

While demand in developed markets is stuck in low gear, global automakers have been increasing their focus on faster-growing regions like China, now the world’s largest auto market, and India.

Input cost a drag

Certain issues with the import of raw materials like steel, plastic and rubber may, however, be a deterrent to fast growth, Siam’s Mathur said.

Rising input costs, coupled with higher interest rates, are likely to make current sales growth levels unsustainable.

“The growth numbers will come down because of the base effect. This kind of number is not sustainable going forward," analyst Matta said.

Earlier this month, Reserve Bank of India raised interest rates for the sixth time this year to try to tame stubbornly high inflation but said there was little chance of another increase in the near term.

India’s auto sector index was up 1.38% at 12:15 pm in a Mumbai stock market that rose marginally.