Record May car sales for India; demand seen solid

NEW DELHI Wed Jun 9, 2010 2:41pm IST

A worker opens the door of a car at a showroom in Mumbai August 3, 2006.  Car sales in India posted their best May ever, rising by almost a third from a year ago, an industry body said on Wednesday, as rising incomes and a rapidly expanding economy offset the impact of price increases. REUTERS/Punit Paranjpe/Files

A worker opens the door of a car at a showroom in Mumbai August 3, 2006. Car sales in India posted their best May ever, rising by almost a third from a year ago, an industry body said on Wednesday, as rising incomes and a rapidly expanding economy offset the impact of price increases.

Credit: Reuters/Punit Paranjpe/Files

Related Topics

Stocks

   

NEW DELHI (Reuters) - Car sales in India posted their best May ever, rising by almost a third from a year ago, an industry body said on Wednesday, as rising incomes and a rapidly expanding economy offset the impact of price increases.

Demand is likely to remain strong in the near-term on a robust economic outlook and the easy availability of finance. The expected normal monsoon rains could give further fillip to sales in one of the world's fastest growing markets, analysts said.

"Consumer confidence level is high in the market and that should help the demand in the near term," said Vijay Chugh, an automobile sector analyst with Ambit Capital. "From rural demand perspective, monsoon will be a factor."

The four-month annual monsoon rains, which is vital for farm output and rural incomes, and impacts demand for goods ranging from cars to televisions, hit the country's southern coast last week as scheduled.

Asia's third-largest economy could maintain growth of 8.5 percent in 2010/11 despite the euro zone problems, provided there is a normal summer monsoon, Finance Minister Pranab Mukherjee said on Tuesday.

Rising costs of raw materials such as pig iron and steel, growing competition from foreign automakers and prospects of a rise in interest rates are concerns for the Indian firms such as Maruti Suzuki (MRTI.BO)and Tata Motors (TAMO.BO)in India.

"We expect some speed breakers, in the form of foreign competition and spurt in raw material prices," brokerage Parag Parikh Financial Advisory Services said in a research note.

"But overall, the long-term demand for the industry remains positively intact."

China and India have been bright spots for global automakers as they recover from a sharp industry downturn. 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.

For a graphic, click r.reuters.com/qyj98k

China's passenger car sales rose at their slowest pace this year in May, setting the stage for more moderate growth in 2010.

STRONG CONSUMER SENTIMENT

Local Indian firms sold 148,481 cars in the month, compared with 113,810 units a year ago, data from the Society of Indian Automobile Manufacturers (SIAM) showed. It was the highest sales in May ever, the industry body said.

Sales of trucks and buses, a barometer of economic activity, rose 58 percent to 48,580 units in May, SIAM said.

The industry group said that strong consumer sentiment in a growing economy helped growth, but a possible rise in interest rate could have an adverse impact on sales in the months ahead.

"Interest rates continue to remain stable. Availability of finance is absolutely not an issue," Vishnu Mathur, director general of SIAM, told reporters. "Because of inflation if steps are taken to control money supply, that will have an impact."

By 0830 GMT, shares in Maruti, 54.2 percent owned by Japan's Suzuki Motor Corp, were up 0.6 percent and Tata Motors were down 0.9 percent, while the main Mumbai market was up 0.2 percent.

Maruti, India's leading car maker, last week said May sales rose 28 percent to a record 102,175 units.

(Writing by Sumeet Chatterjee; Editing by Unnikrishnan Nair and Lincoln Feast)

(For more business news on Reuters India click in.reuters.com)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Earnings Season

Earnings Season

Reliance Q4 sales rise, refining margin narrows.  Read 

Innovative Solution

Innovative Solution

Turning smog into jewels - a Dutch designer's solution to Beijing's pollution.  Video 

Insider Trading

Insider Trading

Rajaratnam's brother loses bid to dismiss insider trading charges.  Full Article 

Literary Giant Dies

Literary Giant Dies

Mourning and memories in Gabriel Garcia Marquez's languid hometown.  Full Article 

S&P on India

S&P on India

S&P: India's ratings to depend on next govt econ, fiscal policies.  Full Article 

Ambitious Aim

Ambitious Aim

In green car race, Toyota adds muscle with fuel-cell launch.  Full Article 

Bond Market

Bond Market

A star abroad, RBI boss riles bond traders at home  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage