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Ford, GM, Toyota: No Slowdown in India

Stocks in this article: F TM TTM

NEW YORK ( TheStreet) -- Automakers have been on a roll in launching compact cars for the Indian market during the second quarter as signs of a slowdown in auto purchases is yet to surface. Ford Motor (F) Figo, Nissan Micra, Volkswagen Polo, General Motors Chevrolet's Beat are among the list. The addition would be the soon-to-be-launched Prius by Toyota Motors (TM). Global Insight research forecasts China and India to account for 40% of growth in the global auto industry over the next five to seven years.

Almost all Indian automakers have reported robust sales growth during July 2010 despite price hikes indicating a strong bullish sentiment in the auto market. Ford sales quadrupled to 8,739 units as compared to 2,146 units sold in July 2009, primarily due to the launch of its new car in the compact cars segment. Although General Motors has not been doing well in the U.S. market, sales in the Indian market have been buoyant, for which it has ramped up its two production facilities to meet the increasing demand for its new models -- Beat and Cruze. Tata Motors (TTM) also reported a 41% increase in sales to 67,799 units in July 2010, compared to 48,054 units during the same month of the prior year. Additionally, Toyota Kirloskar Motors, a joint venture between Japan's Toyota Motor and India's Kirloskar Group, revealed that sales in July grew 36% to 6,835 vehicles from 5,007 vehicles in July 2009.

With regard to price hikes, after four price hikes in just a span of six months, car manufacturers are seeking to raise prices again as their profitability and margins are being squeezed due to higher input costs. In a scenario where sales are increasing and likely to surge further during the festive season (August-October), unless pricing pressures ease manufacturers have no option except to pass on the higher costs to end-customers.

During the past six months rubber prices have increased 40%, pig iron by 25%, hot-rolled steel by 22%, forging steel 10%, aluminum by 4% and copper by 3%, according to industry analysts. Furthermore, analysts reveal that although a correction was seen in commodities prices in the past two weeks another rally is expected soon.

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