Indian auto makers posted another strong month of sales growth in November and analysts said maintaining momentum depended on sustained recovery, a day after India reported surprisingly strong economic growth.
Rising demand has given firms confidence to lift prices to offset rising input costs. Toyota Motor's India unit said it would increase prices on three models by 1.5 to 2 percent from Jan. 1, and a spokesman for General Motors India said it planned to raise prices by 2 to 5 percent in January.
Preliminary sales data from auto firms for November showed industry leader Maruti Suzuki's sales rose 67 percent from a year earlier and those of leading 2-wheeler maker Hero Honda up 32 percent.
Utility vehicles and tractor maker Mahindra & Mahindra saw its vehicle sales nearly double from a year earlier, and tractor sales rose 48 percent.
Mahindra said it would take a decision on price increases in two to three weeks, while Maruti said it had not yet decided on a price rise though it was facing pressure on costs.
"We cannot be immune to the rise in raw material costs," Anjani Choudhary, head of Mahindra's farm equipment division, told CNBC TV18.
Analysts said the robust sales growth was driven in part by stimulus measures, which India is likely to phase out as economic growth recovers, but also reflected the slump in sales last year, when the global downturn hit harder than expected.
"Growth has come on the small base of last year, but I think we can sustain volumes, at least month-on-month, provided industrial production is sustained," said Jatin Chawla, auto analyst for institutional clients of India Infoline.
Rajat Rajagariah, head of institutional research at Motilal Oswal said, said price increases by auto firms would have little impact as the sector had built up a self-sustaining momentum.
The economy's annual growth of 7.9 percent in the September quarter was its fastest in 18 months and was driven by government spending, manufacturing, services and better-than-forecast farm output.
"Will we grow at 7 percent-plus in the next two quarters? ... that's going to be hard. But yes, we will definitely see a rise in car sales, cement sales and all other indicators of consumption," said Dun & Bradstreet economist Yashika Singh.
She said that investment demand and private consumption, both of which were showing good signs, would drive economic recovery, although others felt the upturn was yet to be confirmed.
"There are signals of economic recovery certainly, with the industrial production up, stock markets rising and foreign inflows coming in, but two to three months of data cannot determine a trend," said Shirin Bagga, economist with Boston Analytics.
A high fiscal deficit, uncertainty on the dollar, expectations of a rise in interest rates, a poor monsoon and soaring food prices could all crimp economic growth, she said.
Shares in Maruti rose 1.7 percent in a Mumbai market that rose 1.6 percent. Mahindra shares rose 4.8 percent to 1,078 rupees, while Hero Honda inched up 0.3 percent.
Shares in leading vehicle market Tata Motors, which is yet to report November sales, rose 6 percent to their highest close since Feb. 2008.
(Editing by John Mair)
