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Economy

Maruti Suzuki sales jump in July as India GST lowers prices

MUMBAI (NewsRise) -- Maruti Suzuki India reported a better-than-expected jump in domestic sales in July as the nation's largest carmaker dispatched more vehicles to dealerships to meet demand during the upcoming festival season.

Domestic sales of Maruti cars, minivans and sport-utility vehicles last month grew 22% to 153,298, the company said in a statement on Tuesday.

Automakers usually build up inventory in the run-up to festivals, considered an auspicious time in India to purchase vehicles. Dealers also added inventory in July after they had cut down stocks in the previous month ahead of the introduction of a nationwide Goods & Services Tax on July 1. 

Retailers were minimizing stocks in order to avoid two different prices for the same product as a result of the GST. A reduction in prices due to the new tax also spurred demand, according to analysts.

Maruti had dropped prices of some models by up to 3% to pass on the benefit of GST. Tata Motors also reduced prices of all its cars manufactured in India by up to 7%.

Mumbai-based brokerage Motilal Oswal had expected Maruti's sales at home to grow more than 11% in July. Car sales in India are counted as factory dispatches and not retail sales.

Demand for Maruti's utility vehicles such as Baleno and Brezza, as well as the new compact Dzire, continues to remain robust, Motilal Oswal said in a report Monday. Sales of utility vehicles jumped more than 48% last month, Maruti said.

The largest unit of Suzuki Motor Corp. has been launching more premium cars to shift from its mainstay of small cars. The company is expected to launch an upgraded version of the Swift hatchback and S-Cross crossover vehicle this year.

India is one the fastest growing automobile markets in the world where passenger vehicle sales is expected to grow by as much as 9% in the current fiscal year, according to industry body Society of Indian Automobile Manufacturers. A recovery in monsoon and rising farm incomes were expected to boost demand from rural and semi-urban regions where car sales have been slowing for years.  

Sales of Mahindra & Mahindra's passenger vehicle sustained its growth momentum in July amid higher demand for its SUVs. The company sold 39,762 vehicles last month, a 13% increase from the year earlier.

Mahindra had been grappling with declining domestic sales until May amidst stiff competition from an industry-wide shift to SUVs. Sale of industrywide SUVs expanded 30% in the year ended in March, outstripping a 3.9% rise in overall car sales. With growing affluence, an increasing number of Indians now prefer bigger vehicles to negotiate the country's potholed and accident-prone roads.

Toyota Motor's Indian unit saw its passenger vehicle sales jump 43% to 17,750 units in July.  The company also lowered prices after the introduction of the GST.

Tata Motors saw a 10% rise in domestic sales on the back of strong demand for its new Tiago and Tigor cars.  

Shares of Maruti surged as much as 2.8% to touch their 52-week high of 7,920 rupees in Mumbai trading. The shares later pared their gains to close up 1.96 %, while Mahindra rose 1.77%. The benchmark S&P BSE Sensex gained 0.19%.

--Dhanya Ann Thoppil

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