Sales of utility vehicles rise in December, demand for entry-level cars muted

India's top automakers in December reported a double-digit rise in the sale of the more expensive utility vehicles, while entry-level cars saw muted demand despite discounts. Auto sales numbers are keenly watched as they are among the key indicators for assessing private consumption, which has more than 50% weightage in calculating the country's economic growth.

Utility vehicles (UV), among the fastest-growing segments, saw a 22.3% rise in sales at Maruti Suzuki India and 62.2% at Mahindra and Mahindra.

Utility vehicles have grown more popular among buyers this year, nearly matching production volumes of entry-level cars and sedans, according to the Society of Indian Automobile Manufacturers.

"Discounts have been higher in the entry-level because their demand has been relatively weaker. There is also high inventory," said Jay Kale, senior vice president, Elara Securities.

While India's retail inflation eased below the central bank's upper tolerance level for the first time this year in November, latest unemployment data showed joblessness rose to a 16-month high.

"The price hikes that auto companies have done is a huge jump for buyers in lower-to-middle income brackets," said Mansi Lall, research analyst at Prabhudas Lilladher.

Hero MotoCorp, the world's largest bikemaker, reported a marginal fall in sales, while Bajaj Auto's two-wheeler sales dropped 22%. Sales of TVS Motor Co's two-wheelers also fell 3.3%. Tractors sales, which indicate demand in rural economy and the state of farm incomes, were up by 27.2% at Mahindra and 18.7% at Escorts Kubota. The commercial vehicles (CV) segment reported a double-digit growth for December, with sales at industry leaders Eicher Motors and Ashok Leyland rising 17.3% and 44.9%, respectively.