May 2, 2017 8:25 pm JST

Maruti Suzuki posts fastest sales growth in 3 months as car demand revives

MUMBAI (NewsRise) -- Maruti Suzuki India, the nation's largest car maker, posted the fastest sales growth in three months in April, as demand for small cars surged amid signs of a recovery in rural consumption.

Total dispatches that include compact cars, mini vans and sedans rose more than 23% in April to 144,081 units, the company said in a statement on Monday. Maruti, traditionally associated with small cars, has been shifting focus to bigger models in recent years to meet the rising demand for such vehicles.

Maruti shares rose as much as 3.1% to a record in Mumbai trading as investors bet that the impact of New Delhi's November currency ban on vehicle demand has begun to fade away.

Nomura expects Maruti's sales volumes to grow 13% in the year that started in April, which could lead to a monthly sale of 148,000 cars.

"We are seeing a steady recovery with the government's efforts to re-monetize the economy," said Anil Sharma, principal analyst at IHS Automotive. "So the demand is coming back from rural markets as well."

The demand for automobiles had plunged after the government abruptly recalled high-value currency notes on Nov. 8 in a bid to crack down on corruption. In the following months, the shortage of cash had hurt discretionary spending in Asia's third-largest economy.

Demand in rural India had been hit by two consecutive years of drought until March 2016. The strong monsoon during the last fiscal year had helped boost farm incomes marginally, fuelling demand until the demonetization drive.

Sharma said the surge in sales of small cars such as Alto and WagonR was also aided by the company's enhanced production capacity after the start of its new plant in the western Indian state of Gujarat. The new plant, which has a capacity of 250,000 cars a year, had gone into production in February.

Second-ranked Hyundai Motor India, the local unit of South Korea's largest carmaker, reported a 5.7% increase in local sales to 44,758 units in April.

Meanwhile, Mahindra & Mahindra, India's largest sport-utility vehicle and tractor maker, said its passenger vehicle sales slip 3.9% to 39,357 units last month.

"We are hopeful that the new financial year will bring in positive sentiments for the automotive industry with the key demand drivers in place," Rajan Wadhera, president of Mahindra's automotive division, said in a statement on Tuesday. "Factors such as the ongoing infrastructure development initiatives, outlook for a normal monsoon and the expectation of a stable policy environment will fuel growth in the coming days."

Tata Motors, India's fifth-largest automaker by sales volumes, said dispatches increased 23% in April, aided by demand for new models such as Hexa and Tigor. However, its shares fell after the sales of commercial vehicles dropped 36% in the month, following a court ban in March on the sale of older fuel technology vehicles.

Maruti shares pared the early gains to close up 2.76%, while Mahindra gained 0.48% in Mumbai trading on Tuesday. Shares of Tata Motors lost 1.34%, while the benchmark S&P BSE Sensex was little changed.

--Dhanya Ann Thoppil

Asia300

Maruti Suzuki India Ltd.

India

Market(Ticker): BOM(532500)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 35,348.7M
Shares: 302.08M
Asia300

Mahindra & Mahindra Ltd.

India

Market(Ticker): BOM(500520)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 13,353.3M
Shares: 621.09M
Asia300

Tata Motors Ltd.

India

Market(Ticker): BOM(500570)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 23,023.9M
Shares: 3,395.85M

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.