India's 2010 auto sales up 31%, seen slowing
Car sales in India grew nearly 29% in December, driven by a burgeoning middle class and easier access to loans in Asia's third-largest economy, but analysts cautioned a slowdown amid a likely hike in interest rates, rising fuel prices and higher costs of vehicles in 2011.
January 11, 2011 / 15:39 IST
Car sales in India grew nearly 29% in December, driven by a burgeoning middle class and easier access to loans in Asia's third-largest economy, but analysts cautioned a slowdown amid a likely hike in interest rates, rising fuel prices and higher costs of vehicles in 2011.
Automakers reported sharp jumps in December sales, with Mahindra & Mahindra reporting a 42% rise, market leader Maruti Suzuki posting a 26% jump and Tata Motors reporting a 31% rise in India.Commercial vehicle sales, a key economic indicator, rose more than 27% in December in the world's second-fastest growing car market.China, the fastest growing car market, saw car sales rise by a third in 2010, and is also expected to slow in 2011 due to rising gas prices, withdrawal of subsidies, and new, stringent laws governing registration and sales of new cars.Auto sales in India grew nearly 31% in 2010, driven by ballooning spending power, easier financing and a wider choice of models in an economy growing at nearly 9% annually.The Indian auto market saw seven new models launched in 2010: Ford Motor Co's Figo, Volkswagen AG's Polo, Nissan Motor's Micra, Toyota Motor's Etios, Volkswagen's Vento and Maruti Suzuki's Alto variant.Tata started delivering the Nano -- the world's cheapest car -- in 2010 as well. Sales of the Nano sputtered to around 500 in November, sliding 85% from a year earlier to an all-time low, hurt by safety concerns following reports of some spontaneous fires and financing difficulties.Nano sales picked up in December, reaching 5,784 units.Coming off a high base comparison, Indian auto sales are expected to moderate in 2011, pegged at 12 to 15% by Fitch Ratings and other analysts. While India's car market is growing apace with China's, it has a lot more room to grow with a population of nearly 1.2 bn. Chinese car sales reached 13.8 mn units in 2010, while India sales reached 1.9 mn units."Now with the higher base, they cannot repeat that performance for next year. But in absolute numbers, the demand will be higher," Kunal Dalal, automotive analyst at KR Choksey Shares & Securities in Mumbai, said.Analysts also said an expected rise in interest rates and higher costs of vehicles would dent sales growth.Tata and Mahindra have said they will raise vehicle prices to counter increasing input costs.Still, the Indian auto market is growing much faster than those in the West. The US auto market grew 11% in 2010, snapping a four-year decline."Rising industrial production, easy consumer credit along with increased consumer confidence, and higher disposable incomes will lead to growth for the auto industry," Fitch said in its report. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
