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Business trends

Maruti Suzuki posts best sales growth in five years in June

Low sales of last year ahead of GST roll out contributes to robust data

MUMBAI (NewsRise) -- Maruti Suzuki India, the nation's largest car maker, reported its best monthly sales growth in about five years in June, aided by demand for its compact cars and a base effect caused by the roll out of a nationwide tax last year.

Maruti's total sales grew more than 36% on-year to 144,981 units last month, the Suzuki Motor unit said in a statement on Sunday. Domestic sales of Maruti's cars, minivans, and sport-utility vehicles jumped 44% to 134,036 units, while exports dropped 29% to 9,319 units. However, its domestic dispatches declined sequentially due to planned maintenance shutdown in the last week of June.

Prime Minister Narendra Modi's government rolled out the Goods and Services Tax in July last year. Ahead of the introduction, demand slowed down as people anticipated a cut in vehicle prices after the implementation of the GST. Under the new levy, most vehicles are taxed at the rate of 29%-31%, compared with about 31%-33% previously. Overall taxes on vehicles fell by about 2% for small cars and by as much as 12% for SUVs.

Demand for Maruti's compact cars including new models of Swift and Baleno surged 77% to 71,570 units last month. Sales of Vitara Brezza SUV and Ertiga minivan grew more than 39%. Sales of mini-cars Alto and WagonR jumped more than 15%.

The nation's automobile industry has been witnessing a surge in demand for compact SUVs as an increasing number of Indians with higher disposable incomes prefer bigger vehicles. Sales of industry-wide SUVs expanded 21% in the year ended in March, outpacing a 15% rise in overall passenger vehicle sales.

Most Indian carmakers reported a surge in sales in June on the back of the low base effect and several new launches. Second-ranked Hyundai Motor reported a 20% increase in sales last month, helped by strong demand for the new version of its SUV Creta.

   Tata Motors, the owner of Jaguar Land Rover, reported a 54% jump in overall sales last month. Its compact cars and SUVs, including new model Nexon crossover, drove 63% jump in domestic passenger vehicle sales for the Mumbai-based company.

      Mahindra & Mahindra, India's second-largest SUV maker, reported a 26% rise in June sales to 45,155 units, helped partly by demand for its commercial vehicles. Sales of Mahindra's utility vehicles, cars, and vans grew 12% even as the company fended off stiff competition from Maruti, Fiat Chrysler's Jeep brand, and Ford Motor.

Analysts remain optimistic about the prospects of India's passenger vehicles industry that struggled through last year due to a demand crunch created by the government move to pull back high-value currency notes in November 2016 and roll out of the GST.

"We are optimistic on the Indian auto industry's ability to sustain healthy growth in 2018 led by higher income growth, a rural demand revival, and rise in infrastructure spend," Macquarie said in a note Monday.

Shares of Maruti gained 0.1% in Mumbai trading, while Mahindra lost 1.4% along with a 0.8% decline in Tata Motors. The benchmark S&P BSE Sensex closed 0.5% lower.

--Dhanya Ann Thoppil

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