Indian Auto Market Cooling but Still Considered Solid

As India’s economy continues to expand, new car sales in the country are expected to rise by up to 13% in 2010-2011. Despite rising commodity prices and interest rates, India remains one of the few bright spots for automakers as the economic rebounds in Europe and the U.S. drag on at a snail’s pace.

Infoline auto analyst Jatin Chawla said, “We expect car sales to grow at least 15% and commercial vehicles sales to rise about 25%. So long as the economy is growing along the expected growth rate, jobs are there and salaries are rising, there will be demand.”

New passenger car sales in India are forecast to rise by 1.7 million units during the Society of Indian Automobile Manufacturers’ (SIAM) reporting year which ends in March 2011. The organization also forecasts truck sales to increase between 17% and 18% while motorcycle and scooter sales are expected to increase by up to 10%. Truck sales are seen as a good barometer of commercial activity, and SIAM’s optimistic truck forecast indicates that the Indian economy will see continued growth at least through the first quarter of 2011.

According to SIAM, new car sales in India rose to a record high of 148,481 units in May but retreated to 141,481 units in June. Sales in June still represent a year-to-year increase of 30.8%. SIAM attributed June’s lower new vehicle sales a decrease in pent-up demand and a rise in vehicle prices.

India’s largest automaker, Maruti Suzuki, reported a 28% month-to-month decline in sales in June due to a six-day idling of its manufacturing facilities for maintenance.

Foreign automakers continue to invest heavily in India to offset sluggish growth in established markets. Toyota Motor Corporation has announced that it will invest $103 million to manufacture powertrains for its Etios compact car, which was designed specifically for the Indian market. The Etios will be built by Kirloskar Motor Private, Ltd. (TKM) and Toyota has set an annual sales target of 70,000 in India. The Etios concept model was shown at the tenth annual Auto Expo in New Delhi in January.

Earlier this week, Volkswagen AG announced that it will begin making its premium Audi Q5 SUV at its Aurangabad, India plant. The Audi A4 and A6 are already being built in India.

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