Feb car sales hit record high; March seen up

NEW DELHI Mon Mar 8, 2010 2:26pm IST

New vehicles are seen on the assembly line at a car plant in Talegaon, in this  September 2, 2008 file photo. REUTERS/Punit Paranjpe/Files

New vehicles are seen on the assembly line at a car plant in Talegaon, in this September 2, 2008 file photo.

Credit: Reuters/Punit Paranjpe/Files

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NEW DELHI (Reuters) - Car sales in India jumped by a third in February to a record as buyers rushed to beat higher taxes in the national budget and the momentum should continue in March before new emission norms kick in and push up prices.

India is one of the few countries where demand for cars have been rising, thanks to a fast rebounding economy and rising incomes in the nation of more than a billion people.

Sales in India have climbed for 13 months in a row, reaching 153,845 cars in February from 115,505 in the same month a year earlier, data from the Society of Indian Automobile Manufacturers (SIAM) showed on Monday.

The figure topped the previous high of 145,905 units in January.

Dilip Chenoy, director general of SIAM, said the demand should maintain the pace in March but would likely hit a roadblock when new emission rules push up costs.

The federal budget on Feb. 26 had raised factory-gate duties by 2 percent and companies such as top carmaker Maruti Suzuki, utility vehicles maker Mahindra & Mahindra and Tata Motors passed on the increase to customers.

Automobile makers have to comply with Euro-IV emission norms from April 1 and companies are expected to pass on the costs associated with investing in new technology to consumers.

"We can expect an increase of 2 to 4 percent arising from this ... and along with the rise on account of excise duties means a total increase of 5 to 6 percent," said Surjit Arora, analyst with Prabhudas Lilladher.

He said commercial vehicles would be harder hit as, unlike cars, they have yet to factor in the cost of upgrading to Euro-IV and the rise in diesel prices.

Traditionally, vehicle sales in India rise in March when individuals, companies and government offices buy ahead of the financial year's close before the budget allocations end and to avail of tax-saving depreciation write-offs.

"This year the fall should be sharp," said Chenoy, referring to April. "It is much more significant during a change in emission norms."

In 2005, when Euro-III standards were implemented, car sales dropped to 63,000 units in April from 89,000 in March and it took nearly a year for demand to recover, he said.

Sales of passenger vehicles, which include cars, utility vehicles and multi-purpose vehicles, should top 200,000 units in March but would fall short of 250,000 to reach cumulative sales of 2 million units for the fiscal year to March, Chenoy said.

Passenger vehicle sales rose to a record 1.75 million units between April and February, SIAM data showed, surpassing the previous full-year's 1.55 million units.

Sales of trucks and buses, a barometer of economic activity, soared an annual 87 percent to 58,024 units in February, rising for the eighth consecutive month. Sales in 2008/09 had fallen 22 percent as the global downturn hit the domestic economy.

Sales of motorcycles rose nearly 31 percent to 642,419 units in the month, it said.

(Writing by Janaki Krishnan; Editing by Ranjit Gangadharan)

(For more news on Reuters Money visit www.reutersmoney.in)

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