India's Car Makers See Surge in Sales

Sales jump 17% in June, as emerging auto market helps fuel economic turnaround.

India's carmakers reported that sales for the month of June were strong, underscoring consumer demand and industrial growth in Asia's third-largest economy.

India's top carmaker Maruti Suzuki said sales jumped 17% last month compared with the same period a year ago while Ford India, Tata Motors and General Motors all also reported a sharp surge.

Car sales in India had tumbled in 2008, hit by higher loan costs and fears of job cuts amid the global financial crisis. But government stimulus steps and an economic turnaround led to a recovery in the sector in 2009.

And analysts see sales remaining strong as the economy picks up pace.

"There was pent-up demand for cars which has overflowed into this year," said Mahantesh Sabarad, senior analyst at Fortune Equity Brokers.

India's economy has expanded by 8.6% year-on-year in the most recent financial quarter and Indian banks are still lending readily.

However, carmakers are hiking the price of their vehicles to compensate for the increased cost of raw materials such as steel and rubber, while the government also announced rises in the price of petrol and diesel last week.

Japanese-owned Maruti Suzuki India said it sold 88,091 vehicles in June, up from 85,109 the same month a year ago but down from a record 102,175 units in May, a fall attributed partly to a plant maintenance shutdown.

Low automobile penetration in India, where many consumers are buying their first cars, is expected to keep the market solidly underpinned and make the nation a lucrative destination for global automakers in coming years.

India remains a highly underpenetrated market with about eight cars per 1,000 people compared with around 850 vehicles per 1,000 people in the United States, according to industry estimates.

Copyright Agence France-Presse, 2010

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