India vehicle sales jump 39 per cent in May

Vehicle sales in India jumped 39 per cent in May as rising incomes drove up demand despite higher costs and Ford's new made-for-India Figo compact enjoyed a strong launch.

Car sales rose 30.5 per cent to 148,481 vehicles in May while commercial vehicle sales surged 57.7 per cent to 48,580 vehicles, the Society of Indian Automobile Manufacturers, an industry group, said Wednesday.

Despite the robust growth, rising costs for aluminum and steel are worrying carmakers in India, where low-cost cars are king, as is the prospect of further interest rate hikes in the central bank's battle with inflation.

Prices have been rising in India, but so have wages. Increasing discretionary income in urban India has begun to drive demand for cars, a shift from last year's growth, which was powered by rural consumers, according to analysts at India's Religare Securities, who recently traversed the country, interviewing dealers, consumers and local officials in 12 states.

In the last two years, sales of passenger vehicles in rural India have doubled to 30 per cent of the total, Religare said, and now dealers complain of supply constraints.

They also found that available credit and rising industrial, mining and shipping activity have fueled demand for commercial vehicles. India's investment-led growth is likely to keep demand for commercial vehicles strong, Religare said.

Ford has done particularly well, posting 272 per cent sales growth for May over last year, thanks to strong demand for its made-for-India Figo compact.

Ford says it will begin a second production shift at its manufacturing plant in Maramalainagar, in the southern state of Tamil Nadu, in July, to meet demand for the Figo, for which it has gotten over 20,000 bookings.

Source: indiacar.com Source : Economic Times (6/9/2010)