Last month, car sales in India increased by a third to a record high as it rides on the strength of its economy. However, growth is expected to slow down in the next several months due partly to limited component supplies.
But starting September, the demand may pick up during the festive season in India, Asia's third-largest economy. Sales are expected to peak in November after Diwali, the Hindu festival of lights.
In fact, most workers receive their annual bonuses before Diwali. Sonam Udasi, head of research at IDBI Capital, said that the momentum is “too strong to completely die down,” but that there may be a “sequential decline” very soon.
Udasi said that an increase in input costs will have a stronger impact on sales than interest rates. In recent months, some automakers, including utility vehicle maker Mahindra & Mahindra Ltd. and Maruti Suzuki Ltd., had to cut back on production due to limited component supplies from vendors.
Since the middle of March, India has raised interest rates four times to clamp down on inflationary pressures.
The central bank will review policy next Thursday, after which, rates are expected to rise again. The Society of Indian Automobile Manufacturers (SIAM) said that in August, companies, led by Maruti, a unit of Japan's Suzuki Motor Co., were able to sell 160,794 cars, a 33.2% increase from the previous year.
The industry body said that this is the highest-ever monthly sales. Sales of trucks and buses, an indicator of economic activity, increased by 28.1% to 52,030 units.
This was led by Tata Motors Ltd. Meanwhile, motorcycles sales rose by 19% to 727,542 units. SIAM also said that the automobile sector in India had grown by 35%, on average, in the first four months of the current fiscal year. [via reuters]