Indian car sales seem to be picking up after a lackluster 2011, according to February sales data from the country’s biggest car makers.
But while some of the numbers are impressive – with individual company sales rising 80 per cent or more from a year earlier – analysts cautioned that a few more months were needed before the improvement could be called a comeback.
“It’s a little early to say that [it’s a rebound],” said Deepesh Rathore, managing director at IHS Automotive in India. “February has been strong for most manufacturers and we expect March to also do better but let the momentum carry for a couple more months and then we can take a call.”
At Maruti Suzuki, India’s biggest automaker – which has been hit by labour unrest that may have cost the company upwards of $500m – sales rose to 107,653 units, up 6 per cent on the same month last year. But that followed a bad three months to December, when sales slumped 27.5 per cent to 239,528 units, from 330,687 a year earlier.
Elsewhere, the numbers were stronger. Sales at Hyundai grew 12.8 per cent to 32,629 units compared to February 2011; sales at Tata Motors grew 8 per cent to 36,536; at Mahindra & Mahindra the increase was 33 per cent to 20,573; Toyota’s sales rose 89 per cent to 17,395; and Honda’s gained 83 per cent to 8,856 units.
Last year, high interest rates and a slowing economy sent sales tumbling in the auto industry, where 75 per cent of purchases are on credit. The industry’s trade body predicts flat growth for the fiscal year ending in March – after two consecutive fiscal years of near 30 per cent growth.
February’s figures mark another up-tick after sales began a tepid increase last November. But they could also reflect inventory build-up in advance of the March 16 release of India’s annual budget. The government is struggling to reduce a fiscal deficit and many believe the budget will include increased excise duties for cars, which would prompt consumers to buy before any new taxes are put in place.
That aside, said Rathore at IHS, auto sales tend to track the wider economy and, with GDP growth expectations lowering by the day and a rebound from an abysmal 2011 far from certain, there’s no guarantee of a sustained recovery for the industry. GDP growth fell to 6.1 per cent for the quarter ending in December and growth for the fiscal year ending in March is predicted to land below 7 per cent, a far cry from the 9 per cent predicted early last year.
“As of now, I’m a bit worried because the overall economy is not really showing any signs of recovery,” Rathore said. “Everyone has scaled down their GDP forecasts. Everyone is accepting a 6.5 per cent growth norm and I have a feeling it might come down more.”
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