India car sales growth at 10 year high

India car sales growth at 10 year high

India's car sales rose 39.5 percent in April over last year -- the biggest jump in a decade but headwinds from rising costs are starting to drag on India's auto boom.

April car sales hit 143,976, up from 103,227 vehicles a year earlier, the Society of Indian Automobile Manufacturers, a trade group, said Monday.

Overall passenger and commercial vehicle sales were 231,267 in April, up 39.4 percent from 165,868 vehicles a year earlier.

India's sustained auto boom has attracted auto majors from around the world, including Ford, Nissan and General Motors, who are all trying to build smaller, more affordable vehicles to tap growing appetite for cars in Asia's third-biggest economy.

Despite impressive annualized gains, 13.2 percent fewer vehicles were sold in April than in March, when sales hit 266,471 vehicles.

"There should not be euphoria," said Vishnu Mathur, the new director general of the Society of Indian Automobile Manufacturers. "We are seeing an initial process of moderation of growth rates. You cannot sustain such high growth rates forever."

For one thing, auto sales last April were unusually low, thanks to the global recession. For another, commodity prices are likely to continue to rise as the global economy recovers, despite efforts by the Indian government to contain costs, Mathur said.

"We expect double digit growth happening, but in more moderate quantities," he said.

Most Indian auto majors have passed higher costs -- from commodities used in manufacturing, a change in emissions norms and a tax hike -- on to consumers, Vaishali Jajoo, an analyst at Mumbai's Angel Broking, said in a research note.

Despite higher costs, strong consumer confidence, available credit and new vehicle launches -- like the Manza sedan from Tata Motors and the Eeco van from Maruti Suzuki -- helped sales, analysts said.

Maruti again dominated car sales, accounting for 47.7 percent of all cars sold in India in April.

Tata, India's largest commercial vehicle maker, reported 52.5 percent total volume growth, driven by a 63.1 percent surge in medium and heavy commercial vehicle sales.

Overall commercial vehicle sales jumped 64.5 percent in April to 49,086 vehicles, a reflection of India's rebounding economy and priority spending on infrastructure.