Car sales boost in India thanks to easy loans

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NEW DELHI – Indian car sales hit their highest monthly figure in February, as cheaper loans and price hike apprehensions in March boosted buying, but rising interest rates as well as more expensive vehicles could have an impact on demand in the coming months.

An Indian driver moves a Hyundai car from the Hyundai car park to Chennai Port Trust in India for export on January 24, 2010.

al Car sales jumped 33% to 153,845 cars from 115,505 a year earlier, according to data released Monday by the Company of Indian Automakers, or SIAM. January sales were 145,905 cars.

February’s growth follows an increase of 32% year-on-year in January and 40% in December. Car sales jumped 61% in November of last year, which was the fastest growth rate since February 2004.

“It is mainly the pre-purchase of vehicles that helps growth,” said Dilip Chenoy, Director General of SIAM. “There is a lot of pent-up demand in India and loans are still available at lower interest rates, which helps sales.”

Auto sales in India have increased since the start of 2009, after the government offered incentives to purchase new vehicles through several measures, including tax cuts. These incentives reversed a decline in car sales for four months until January 2009.

However, on February 26, India raised excise duties on automobiles by two percentage points as part of a phase-out of previously taken stimulus measures to shield Asia’s third-largest economy from a downturn. global. The tax hike was widely expected and led many automakers to raise their prices by about the same amount.

Local car sales at Maruti Suzuki India Ltd., India’s largest car manufacturer by sales, and a unit of Suzuki Motor Corp.

7269 1.04%

, rose 18% in February to 73,812 cars. Hyundai Motor Co.’s local unit sales climbed 46% to 31,000 cars.

Car sales at Tata Motors Ltd.

, maker of the Nano mini-car and the Manza sedan, grew 48% to 22,980 cars.

“The price hike increases monthly auto loan payments from just 50 rupees ($ 1) to 60 rupees and does not have much impact on consumers,” said Kaushal Maroo, automobile analyst at Religare Capital Markets Ltd. growth trend to continue even if prices have increased.

In addition, major private sector lenders including ICICI Bank and HDFC Bank,

increased interest rates on auto loans last week, which could hurt demand. But, Mr Chenoy said potential buyers would likely turn to state banks, which have yet to raise interest rates.

“Sales will continue to grow as long as liquidity does not decline and interest rates remain favorable,” Chenoy said.

Automakers are expected to raise prices further as the government’s new emission standards come into effect on April 1. Mr Chenoy said it could hurt sales as well.

“The last time new emission standards were implemented in 2005, it took six to seven months for sales to recover. This time, too, we expect some impact. The impact will be more. on sales of commercial vehicles. ”

But Mr. Chenoy expects March sales to remain strong.

“March is generally the best selling month of the year, as customers buy vehicles to claim depreciation in this fiscal year only. March won’t be different this time around either,” he added. .

Write to Nikhil Gulati at [email protected]

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