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Cost snarl fails to jam auto sales
June, 03rd 2008

Car and two-wheeler makers continue to report robust sales growth despite continued spiralling of input costs. Analysts believe the sales spurt is eating into profitability as the price hikes announced by most companies over the past few weeks do not cover the increase in costs entirely, and also because most companies are offering attractive discount schemes to accelerate purchases.

Then, even the price hike is not across the board - Honda Siel Cars has actually dropped prices by up to Rs 5,000 to pass on the benefit of lower sales tax to consumers.

Industry watchers point out that the lowering of central sales tax from 3% to 2% impacts few automotive companies, since most have already availed of lower CST rates from states where they make cars.

So, Hyundai Motor India pays only one percent CST in Tamil Nadu and Tata Motors already pays two percent and the reduction in CST now does not come as a relief to these companies.

Coming back to sales performance, Maruti Suzuki India posted 16.2% increase at 69,001 units (59,400 units), with even the Maruti 800 registering over 25% growth to 6,830 units (5,456 units).

Maruti attributed the sharp increase in M800 numbers to an early dispatch of the dual fuel LPG variant of its bread and butter model, slated for launch this month. Swift hatchback completed three years, recording the highest ever sales of 10,408 during May.

Total exports were up almost 41% and combined sales growth of Maruti for April and May was almost 20% at 1,31,337 units (1,09,752 units).

Hyundai Motor India reported 51% sales growth at 40,261 units (26,648 units), of which 24,510 units (16,643 units) were sold in the domestic market. The companys multiple product strategy for the compact car segment appears to have paid off, with 50,000 units of the i10 being sold in the first five months of the calendar year.

The combined sales of Santro, i10 and Getz stood at 34,328 units, Accent and Verna together sold 5,874 units, Elantra 14, Sonata Embera 41 units and Tuscon 4 units.
Mahindra & Mahindra sold 1,531 units of the Logan, down from 2551 in the same month last year.

Not just passenger cars, even two-wheeler makers reported robust growth. Hero Honda Motors saw sales increase of 9.5% to 3,12,317 units (2,85,109 units). Given a similar growth rate in April, the company has already sold close to six lakh units this fiscal.

Bajaj Auto, though reporting a much lower growth clip at 4%, recorded 8% increase in bike sales and 7% in overall two-wheeler numbers. It sold 179,649 bikes (167,008 units) and 180,935 two-wheelers (169,327 units) during May.

Managing director Rajiv Bajaj said the first of the four new 125cc+ motorcycles from his company is scheduled for launch in September. Three-wheeler sales fell by a whopping 15% last month to 20,576 units (24,110 units).

TVS Motor Company also reported a four per cent growth at 1,12,770 units (1,08,151 units). While bike sales grew 10% at 54,717 units (49,651 units), exports stood at 14,071 units (9,849 units).

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