April car sales up ahead of likely price hikes

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New Delhi, May 8: India's domestic car sales rose at the fastest pace in seven months in April, while bike sales notched up their first annual rise in a year, as customers advanced purchases expecting the rising cost of steel to push up prices.

Passenger car sales rose an annual 17.2 percent to 98,740 units in the month, data released by the Society of Indian Automobile Manufacturers (SIAM) on Thursday showed.

Steel prices have risen sharply in India, stoking expectations automobile firms will raise prices to maintain margins.

"If they wait, in the next 2-3 months, prices will go up. To avoid that, they are buying now," Sugato Sen, director at SIAM said. "They have now resigned to the fact (interest rates) are not going to go down in the near future."

India's top car maker, Maruti Suzuki India Ltd, and No. 3 bike maker TVS Motor Co Ltd have said they will raise prices.

Motorcycle sales, which had declined nearly 12 percent in the year to March 2008 as high financing costs weighed after a series of interest rate increases, rose 8.3 percent in April to 501,592 units.

Most bikes in India are bought with loans but with the key lending rate near a 5-½ year high, demand has eased.