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India Automakers Expect Car Sales to Rise on Economy

Indian annual car sales are poised to rebound from the first annual decline in a decade and rise as much as 5 percent over the next year.

Local deliveries of cars, including sport-utility vehicles, may gain 5 to 7 percent in the year started this month as economic growth accelerates, according to an annual forecast from the Society of Indian Automobile Manufacturers. Indian Finance Minister Palaniappan Chidambaram said April 1 he expects the country’s GDP to grow about 6 percent the next year, up from 5 percent last year.

Annual car sales in the 12-month period ended March fell 6.7 percent to 1.89 million units, the biggest decline since 2001 as slowing economic growth and high interest rates kept buyers from showrooms, according to the manufacturer group. Carmakers from Suzuki Motor Corp. (7269) to Ford Motor Co. are introducing new models and offering discounts to boost sales.

“Revival in car sales will come with an acceleration in economic growth,” said Umesh Karne, an analyst with BRICS Securities in Mumbai who tracks the automobile sector. “As investments slowly return in India, we expect it to revive demand for vehicles.”

Prime Minister Manmohan Singh has pledged to reduce India’s record current-account deficit and take steps to increase investment flows from abroad as he seeks to boost economic growth. Finance Minister Chidambaram said this month a cabinet panel on investment will help speed approval of infrastructure projects.

‘It’s Been Bad’

India’s industrial output probably shrank 1 percent in February, according to a Bloomberg survey before data due April 12. The Reserve Bank of India reduced its repurchase rate by 25 basis points each in January and March. The next review is scheduled for May 3.

“Be it interest rates, inflation or fuel price, you take any factor that has impact on consumer buying behavior, it’s been bad,” said S. Sandilya, president of the manufacturer group. “Having said that, there’s hope. We’ve seen people going from very small cars to larger cars because of affordability.”

Maruti Suzuki India Ltd. (MSIL), India’s biggest carmaker by sales volume, may begin building a new factory as early as next quarter, to add capacity and access ports on the nation’s west coast. Ford is also investing almost $1 billion in a new factory in Gujarat that will be complete by 2014.

Two-Wheelers

Ford will introduce its EcoSport compact SUV this year, while Honda Motor Co. (7267) will introduce the Amaze, its first model in the country with a diesel engine tomorrow.

Two-wheeler sales are expected to increase between 6 and 8 percent in the year started April, after expanding 2.9 percent to 13.8 million units the previous period, according to the manufacturer group. Commercial vehicle sales, including those of trucks and buses, may gain as much as 9 percent, the group said.

To contact the reporters on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net; Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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