Home >industry >manufacturing >Sales of trucks, buses grow fastest in nearly three years

New Delhi: Sales of trucks and buses in February rose the fastest in nearly three years, indicating that economic expansion in India may pick up pace.

Sales of commercial vehicles grew for the fourth straight month, according to data provided by industry group Society of Indian Automobile Manufacturers (Siam). They grew 10.1% to 52,843 units in February from a year ago, after rising 9.05% in November, 9.01% in December, and 5.3% in January.

Sales of cars also grew for a fourth month in a row to 171,727 units, rising 6.85% from a year earlier. However, the industry remains worried about weakening rural demand, which has affected sales of motorcycles in the country, which declined for a fifth month in a row. Sales of motorcycles were down 8.22% to 774,122 units.

There are two positives and three negatives that can be derived out of vehicle sales in February, said Sugato Sen, deputy director general of Siam.

“First, car sales will not see a second consecutive decline in this fiscal year and there are chances that car industry may even grow in higher single-digit in the next," Sen said. “Second, commercial vehicle sales are a reflection of economic activity in the country. The challenge will be to sustain it."

Concerns regarding a second consecutive annual decline in passenger cars are over and the segment is likely to grow between 3% and 5% in the year to 31 March. Between 2010 and 2012, car sales were growing in the range of 20-25% on a sequential basis.

Demand has picked up across the board in the medium and heavy commercial vehicles segment, said Anil Sharma, an analyst with consulting and forecasting firm IHS Automotive.

“A majority of new sales are coming from fleet replacement. I won’t stress on figures as they are going to be pretty good even in the coming months," Sharma said.

“Government action happening at the macro level is still not translating into any thing substantial. We will see that impact coming in during the next fiscal," Sharma said. “In the next three months, we will be able to say if it is sustainable."

Sen added that industry remains worried on three fronts: decline in the sales of motorcycles and light commercial vehicles, and a large number of passenger vehicle manufacturers still posting declining numbers.

“Out of 18 PV (personal vehicle) manufacturers who report their monthly sales numbers to us, only five are posting growth in sales. We need to grow faster to recover the lost ground in the last two-three years and for that rest of the manufacturers will have to start posting growth," he said.

Sen added that sales of motorcycles and light commercial vehicles have declined primarily because of sluggish demand in the rural parts of the country. “We are hopeful for a good monsoon to set things right in those areas," he said.

A delayed and deficit rainfall hurt the summer crop and crimped farm incomes. In October, the government raised the minimum support price for wheat and rice in the range of 3-4%—the lowest in recent years.

However, the Union government said on Monday that the Indian economy is likely to grow at 7.4% in the current fiscal year based on a debatable new method, estimated to be on par with China. It is also the first time that the economy is projected to be bigger than $2 trillion; India’s gross domestic product is estimated to be $2.1 trillion in 2014-15.

The new government has initiated a set of reforms to revive growth. Since the National Democratic Alliance government came to power in May, it has allowed 100% foreign direct investment (FDI) in railway infrastructure, increased the cap on FDI in the defence business and insurance sectors to 49% from 26%, and eased FDI rules in the construction sector.

It is also looking to raise 58,425 crore this fiscal year through stake sales in state-owned companies that include Coal India Ltd, Oil and Natural Gas Corp. Ltd and NHPC Ltd.

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