Car sales up nearly 21%, growth to slow

Car sales up nearly 21%, growth to slow

New Delhi/ Mumbai: Car sales in the rapidly growing Indian market rose 20.8% in November as demand peaked in the festival season, but analysts cautioned the rate of growth would slow against high comparisons, a limited supply of components and a possible rise in interest rates.

Car sales grew to 161,497 units in November, according to data from the Society of Indian Automobile Manufacturers (Siam). Sales of trucks and buses, a key indicator of economic health, grew 18.3% from a year earlier.

Demand for cars is rising rapidly in India, which is Asia’s third-largest economy and is growing at nearly 9% annually. Domestic auto sales have grown 28.4% since April through November from the year-ago period.

While auto sales in Asia’s third-largest economy are expected to continue to grow, that kind of growth is not sustainable when compared to the robust growth witnessed last year.

November sales were buoyed by India’s festive season, which starts in early September and peaks in November after the Hindu festival of Diwali, when it is considered auspicious to buy big-ticket items and when most people get their annual bonuses.

“December we expect (sales) will be further down, December traditionally has been a lower volume month," said Sugato Sen, senior director at Siam, referring to passenger vehicles that include cars.

Talks of another hike in interest rates have also resurfaced, which could also dampen demand, analysts said. India has raised interest rates six times this year to clamp down on inflationary pressures.

Sales of buses and trucks, which typically rise in the second half of fiscal year, might not grow this year, partly because demand for new vehicles that comply with new emission standards that came into effect in October is not yet clear, said Vaishali Jajoo, analyst at Angel Broking.

“We will have to wait and watch for that," she said, adding that sales of such vehicles will also depend on freight demand going forward.

Limited component supplies from vendors is also becoming a stumbling block for automakers such as Mahindra & Mahindra and Maruti Suzuki, which have had to curtail production in recent months. 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. Tata Motors’ net profit surged to Rs2,223 crore ($492 million), while Maruti’s net profit rose 5% to Rs598 crore in the period.