NEW DELHI - Indian car sales should pick up speed this month as bargain-hunters who expected last week's annual budget to bring price cuts go shopping, analysts say.
But demand won't race ahead on the back of the over five percent cut in car prices announced on the weekend following the budget's reduction in excise duties, analysts said on Sunday.
March sales will go up "because everybody was waiting for a drop in prices", Avinash Gorakshakar of Emkay Share and Stockbrokers said. "There'll be temporary buoyancy in volumes but demand won't shoot through the roof," Prafull Rai of Enam Securities said.
Gorakshakar forecast the car market would grow by nine percent in the year to March 2003 and 10-12 percent next year if carmakers can maintain the lower prices.
But that rise would still be below potential in a country where only four of every 1,000 Indians own cars compared with 35 in Thailand and 450 in the developed world, analysts said.
India's 15 vehicle makers sold only a combined 689,830 units in the year to March 2002 in a country of over a billion people.
Automakers need a faster-growing economy and a higher wage environment for car demand to surge in India, analysts said.
The government is targeting growth of 6.0-6.5 percent for 2003/04 (April-March), up from an estimated 4.4 percent in this year. But that is still below the up to 10 percent growth needed to tackle widespread poverty, economists say.
"For demand to really take off, the economy needs to grow at a higher pace and you need higher disposable incomes," Rai said.
A Maruti Udyog Ltd. official said India's biggest carmaker, which has a 50.4 percent market share, had passed on the "entire benefit of the cut in excise duties in the budget to buyers".
Finance Minister Jaswant Singh last Friday reduced the excise duty, or production tax, on cars, utility vehicles and tyres to 24 percent from 32 percent in the 2003/04 budget.
Maruti, a unit of Japan's Suzuki Motor Corp., said the ex-showroom price in New Delhi of the standard Euro II version of its largest selling car, Maruti 800, would be now 10,884 rupees ($228), or 5.4 percent, lower at 200,969 rupees.
It cut prices on its hatchback Zen model and the Esteem sedan which compete with cars from Hyundai Motor Co, Fiat and domestic firm TELCO by similar percentage amounts.
Hyundai Motor India Ltd, the No 2 carmaker and a wholly-owned unit of South Korea's Hyundai, announced price cuts of 16,000 rupees to 65,000 rupees on its Santro hatchback and the higher-end Accent and Sonata sedans.
"Some buyers might graduate to higher end cars because of these cuts, said Rai.