Mumbai: It was smooth sailing for automakers during the month of May as new launches buoyed sales, spurred by robust retail demand on the back of continued economic recovery.

India’s top five carmakers, Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra and Mahindra Ltd, Tata Motors Ltd and Honda Cars India Ltd, collectively sold 243,856 units during the month, up 20.6% from 202,187 units a year ago.

Automakers in India consider dispatches to dealerships as sales. New model launches by five of the seven carmakers reporting sales led to a jump in numbers because they filled inventory channels.

Moreover, a broader economic recovery, led by non-metro geographies, also spurred demand. This uptick in demand was reflected in the 7.7% GDP growth during the three months ended March, up from 7.2% in the December quarter. Growth had been lagging below 7% since demonetization in November 2016.

To be sure, the broader manufacturing industry cooled off in May. The Nikkei manufacturing purchasing managers’ index fell to 51.2 in the month from 51.6 in April, led by weaker domestic demand and output expansion, said Sonal Varma, managing director and chief India economist, Nomura Financial Advisory and Securities (India) Pvt. Ltd, in a 1 June note.

The index remained above 50, which indicates growth, for the tenth month in a row.

Passenger car market leader Maruti Suzuki’s domestic sales (excluding vans and commercial vehicles) jumped 23% to 144,780 units in May over the year-ago period, as the compact car segment led growth with a 50.8% jump to 77,263 units. The local arm of Japanese automaker Suzuki Motor Corp. is facing robust demand for the next-generation Swift, premium hatchback Baleno and compact sedan Dzire in this segment.

The utility vehicles segment, including the best-selling Vitara Brezza and S-Cross models, also contributed with a 13.4% rise in sales to 25,629 units over May last year. An automatic transmission variant of the Brezza was launched during the month.

However, old workhorses Alto and WagonR and the mid-sized sedan Ciaz continued to be in the red, declining 3.1% and 14.8%, respectively.

With new variants of the three models, in addition to the next-gen Ertiga MUV (multi-utility vehicle), to be launched later this fiscal, Maruti is expected to maintain its leadership position in the short term, analysts said.

The local arm of South Korean automaker Hyundai Motor Co. reported a 7.14% rise in sales to 45,008 units in May, on the back of next-generation models such as compact SUV Creta and Elite i20 hatchback launched during the month. The Grand i10 hatchback and Verna mid-sized sedan also continued to drive growth, according to Rakesh Srivastava, director of sales and marketing at the firm.

Sales at homegrown automaker Mahindra were almost flat at 20,715 units during “the relatively subdued month", according to Rajan Wadhera, president of the automotive division at the firm.

“With the forecast of an upcoming normal monsoon, we are confident of good growth in the coming months," he added.

It was a “challenging" month for Tata Motors as well, with “retail slowing down", according to Mayank Pareek, president of the passenger vehicles business at the firm. However, the Tata group flagship posted a 61.11% jump in sales to 17,489 units during the month on the back of continued demand for the new crop of models, namely the Nexon compact SUV and Hexa SUV, followed by the Tiago hatchback and Tigor sedan.

Pareek said the automatic transmission variant of the Nexon, launched during May, has received “an overwhelming response", adding that Tata “will continue to strive towards driving volumes and increasing market share as part of the ongoing turnaround journey".

The maker of the City sedan, Honda Cars India, reported a 40.66% rise in sales to 15,864 units, on the back of the next-generation Amaze sedan launched in May, according to Rajesh Goel, senior vice-president and director of sales and marketing at the firm.

Going forward, the prediction of a normal monsoon across the country by the India Meteorological Department (IMD) will buttress demand, in addition to the government’s continued focus on developing infrastructure and the rural sector.

However, higher prices of raw materials such as oil and steel may weigh on profit margins and build inflationary pressures, said Varma of Nomura.

The Reserve Bank of India expects India’s economic growth to strengthen to 7.4% in the current fiscal, from 6.7% in 2017-18.

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