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India's biggest carmaker Maruti Suzuki said on Thursday its July vehicle sales rose for the first time this year, but analysts warned the gain was likely to be short-lived as high ownership costs continue to weaken domestic demand.
Maruti's July sales rose 1% from the same month a year ago largely due to the popularity of its entry-level Dzire sedan. Sales last year were also hit by a plant shutdown due to labour unrest.
The gain contrasted with a 21% drop in vehicle sales by Mahindra and Mahindra , India's largest manufacturer of utility vehicles and SUVs, which has been hurt by rising competition and a hike in excise duty.
Mahindra said it would halt production at its plants for up to 6 days in the next few months due to the slowing demand.
Maruti is India's leader in the small car market and accounts for 40% of all passenger vehicles sold in the country. It faces increased competition as global automakers step up launches in a market that has endured falling sales for the eighth-straight month after double-digit growth just two years ago.
Demand for cars, especially diesel-powered vehicles, was hit by a government decision to allow monthly increases in the prices of the fuel.
Maruti, controlled by Suzuki Motor , sold a total of 83,299 vehicles in July, with Dzire sales rising 34% to 15,249.
Overall car sales in India are expected to rise 3-5% in the financial year that began on April 1, according to a local industry body, compared with double-digit growth just two years ago.
