Car sales in India and China rise, but growth may not continue

Car sales in India rose 38 per cent year-on-year to a record high last month, with demand expected to continue to increase throughout the country’s festive season beginning next month.

During July 158,764 cars were sold, according to the Society of Indian Automobile Manufacturers (SIAM).

SIAM has forecast car sales in India to grow 12-13 per cent in the year ending March 2011. The car sector grew at an average of 35 per cent in the first four months of the current fiscal year.

However, capacity constraints, a possible rise in interest rates and supply bottlenecks such as limited components are expected to put pressure on manufacturing.

In China, car demand growth in July was the slowest since March 2009 with passenger car sales to dealerships numbering 946,200, an increase of 13.6 per cent year-on-year.

This compares with a 19 per cent rise in June and sales may start to reduce as early as September, according to the Daiwa Institute of Research.

These reductions are due to increased inflation eroding Chinese buyers’ disposable income and the knock-on effect of dealers retaining more unsold cars as demand reduces.

Manufacturers recording increased sales during the April-June quarter cited positive sales in Asian markets for the increase, so this drop in India and China – two of the world’s largest car markets – will concern the industry.

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