Motown January 2011

Car sales (in absolute numbers) raced to highest-ever in a month, backed by rising disposable incomes and cheaper loans, though companies fear a slowdown in the coming months as interest rates are rising and costs of fuel and commodities are going up. According to figures released by the Society of Indian Automobile Manufacturers (Siam), car sales started the new year with a bang, with total sales touching 184,332 units (up 26%) in January, the highest-ever number for a single month. This beats the previous all-time high sales of 182,992 cars last October. Higher sales by companies like Maruti, Ford, Tata Motors and Toyota led the numbers. The rise in demand has been fuelled by rising incomes and economic activity that gelled well with new launches and comfortable interest rates. However, a combination of negative factors are fast building up and threaten to derail the demand momentum. These include frequent hardening of interest rates (RBI has raised key policy rates seven times in the last one year), which will affect demand, considering that 70% of sales take place through the financing route. The hike in petrol prices and commodity costs has affected the affordability of vehicles, at a time of high inflation, which will also hit demand. A negative blow could come in the Budget if government hikes excise by 2% to bring it back to the pre-slowdown level, something companies say will immediately result in a similar hike in vehicle prices. Major companies like Maruti, Honda and Mahindra have already said the growth will be impacted this year. Siam has forecasted that sales growth would not match up to the 30% scored last year and would be around 15-18% this year. Sugato Sen, a senior director at Siam, said rising interest rates, inflation and higher raw-material costs would likely to moderate growth in the next financial year, starting April 1. While car sales were the highest in January, two-wheeler sales also remained healthy, going up by 17.5%. Motorcycle numbers were up by 15% at 7.47 lakh units against 6.5 lakh units in January last year. Sales of scooters were up 29.5% at 1.8 lakh units. Overall auto sales in the domestic market, including cars, two-wheelers, three-wheelers and commercial vehicles, remained healthy at 13.2 lakh units, a growth of 19% over 11.1 lakh units in January last year.

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