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India car, SUV sales expand at fastest pace in 20 months on new models

Maruti Suzuki, Tata Motors see robust demand in May

Maruti, the nation's largest car maker, reported its fastest sales growth in 16 months for passenger vehicles in May with a 26% jump.

MUMBAI (NewsRise) -- Passenger vehicle sales in India grew at the fastest pace in 20 months in May, helped by demand for new car models and a lower base in the year-earlier period.

According to data from industry group Society of Indian Automobile Manufacturers, or SIAM, sales of passenger vehicles, including cars, sport-utility vehicles, and vans rose about 20% to 301,238 units last month from 251,764 a year earlier.

"There was a lull in vehicle sales in May and June last year because people were anticipating a cut in vehicle prices after the implementation of the Goods and Services Tax," said Sugato Sen, deputy director general of SIAM. "Demand for new models also helped to grow sales this year."

India rolled out the nation-wide GST in July. Automakers cut prices as tax rates declined under the new structure. Under the GST, 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.

Sales of SUVs recorded an 18% increase to 82,086 units as demand for models such as Maruti Suzuki India's Vitara Brezza, Jeep's Compass, and Hyundai Motor's Creta continued to expand.

Car sales surged 20% to 199,479 units, aided by the surge in demand for subcompact vehicles such as Maruti Swift and Baleno. Automobile sales in India are counted as factory dispatches and not retail sales.

According to brokerage Kotak Institutional Equities, improvement in rural demand, government push on infrastructure spending, availability of affordable finance, and overall economic growth were key drivers of sales growth in May.

India's federal budget, announced in February, increased the spending allocation toward infrastructure in this fiscal year to $88 billion from $73 billion in the previous year. Prime Minister Narendra Modi's government is pressing the pedal to revive investments in construction of roads, ports, and railways with an increased focus on rural India.

Maruti, the nation's largest car maker, reported its fastest sales growth in 16 months for passenger vehicles in May with a 26% jump. Demand for Maruti's compact cars Swift and Baleno surged 51% during the month.

Mahindra & Mahindra, India's second-largest SUV maker, reported a 12% increase in May sales. Tata Motors, India's largest automobile company by revenue, reported a 58% increase in volumes during the month on the back of new models Nexon and Hexa.

Domestic sales of trucks and buses, considered a barometer of the economy's health, jumped about 43% to 76,478 units in May. Truck demand has received a boost in India with the federal government focusing on building more highways, ports, and airports. Stricter implementation of a ban on overloading of trucks also helped shift demand toward bigger vehicles.

SIAM's Sen said the growth momentum in truck and bus sales is expected to continue amid forecast of abundant rains and government spending on infrastructure development.

Sales of two-wheelers increased 9.2% in May to about 1.85 million units.

--Dhanya Ann Thoppil

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