India auto sales seen extending record on consumer confidence

[MUMBAI] India's auto sales will probably climb for a fourth straight year to another record as consumer sentiment recovers in the wake of an unprecedented clampdown on cash, according to the country's automaker association.

Deliveries of cars, sport utility vehicles and vans will probably rise as much as 9 per cent in the current fiscal year that started April 1, Sugato Sen, deputy director general of the Society of Indian Automobile Manufacturers, said in New Delhi on Tuesday. Sales increased at the fastest pace in six years - up 9.2 per cent - to 3.05 million units in the year ended March 31, the group said.

Demand for automobiles has rebounded from November and December, when sales plunged following Prime Minister Narendra Modi's decision to scrap old high-denomination bank notes. That hurt car sales as consumers put off purchasing big-ticket items to conserve cash. Consumer sentiment is expected to improve as banks work to replace the notes taken out of circulation.

A salary boost for Indian government employees will also help spur sales, according to Mr Sen. The government will likely disburse one trillion rupees (S$21.8 billion) to public employees as it implements a panel's recommendation on salaries.

Sales of SUVs in India surged, mirroring a similar global trend including in the two biggest markets of China and the US, as growing affluence and increasing attraction for roomier vehicles with higher ground clearance lured buyers. Industrywide deliveries of SUVs surged 30 per cent to 761,997 units, while passenger car sales climbed 3.9 per cent to 2.1 million units and vans rose 2.4 per cent to 181,734 units.

The growth rate and low level of vehicle ownership is attracting more automakers to forge partnerships to sell in Asia's third-biggest economy. PSA Group in January said it's setting up a joint venture with a local company in India, while Volkswagen AG plans to team up with Tata Motors Ltd.

Maruti Suzuki India Ltd, the local unit of Suzuki Motor Corp, maintained its market-leading position as its Vitara Brezza SUV and Baleno hatchback attracted buyers.

Hyundai Motor Co and Mahindra & Mahindra Ltd kept their second and third spots respectively. Tata Motors, which introduced new models including the Tiago hatchback, overtook Honda Motor Co to become the fourth biggest by volume in the country.

BLOOMBERG