Auto sales rise in May; Maruti posts record

Auto sales rise in May; Maruti posts record

New Delhi: Indian auto makers reported robust sales growth in May, with Maruti Suzuki posting a record for monthly sales, as a rapidly expanding economy pulled buyers into showrooms despite price increases.

China and India have been bright spots for global auto makers amid a sharp industry downturn, and vehicle sales in India are expected to reach a new high for the second year in 2010-11 though the market is much smaller than China’s.

Maruti, the country’s leading car maker that is 54% owned by Japan’s Suzuki Motor Corp, said it sold 102,175 vehicles in May, the most for any month and up 28% from a year earlier.

The news helped its shares climb 1.8% in a weak stock market that fell 2.2%.

Hyundai Motor Co Ltd’s Indian unit, which is Maruti’s closest competitor in the domestic market, sold 46,808 units in May including exports, an annual increase of 7%.

“Over all there is no issue on the demand front. Auto sector is linked to the economy, and as the economy has picked up, total auto volumes have to come up," said Vaishali Jajoo, a sector analyst with Angel Broking.

India’s manufacturing sector expanded at its fastest rate in over two years in May, bolstered by steady growth in output, new orders and employment, a survey showed, in another sign the country’s economy is surging.

Tata Motors, whose products range from heavy trucks to the ultra-cheap Nano car, said May sales rose 41%, while utility vehicles and tractor leader Mahindra & Mahindra saw sales jumping 69% from a year earlier.

Demand for motorcycles and scooters also rose in May. Hero Honda Motors, the top firm in the segment, said sales rose 14% to more than 435,900 units. Rival Bajaj Auto’s sales leapt 62% to about 299,440 units.

However, rising costs of raw materials such as pig iron and steel and intense competition from global auto makers are concerns.

“There are certain issues like the raw material cost; there could be an increase interest rates," Jajoo said, but was optimistic that companies would be able to pass on higher costs to customers as long as demand remained strong.

“We are positive on the stocks," said Jajoo, who advises accumulating shares such as Maruti.

Among other car makers, General Motors India saw May sales rise by 61% to 8,225 units, while the Indian unit of Toyota Motor Corp said sales rose 54% to 6,050 units.

On Tuesday, PMI data from export-dependent countries like China showed a slowdown in growth, indicating shaky external demand, and an Indian government official said the country’s April trade numbers do not reflect the possible impact of Greece’s debt woes on trade.