Boosted by Maruti Udyog Limited and Hyundai Motor India's sales of compact models, the domestic market posted 24 per cent growth in car sales to 1,04,488 units last month compared with 84,235 units in January 2006.
The sales also marks a surge of 29 per cent from the December sales of 81,026 vehicles.
The country's biggest carmaker and market leader MUL clocked its highest-ever vehicle sales of 62,248 units in the local market in January, while HMIL, the second-largest domestic car manufacturer, sold 17,460 units last month.
In the domestic market, commercial vehicles too posted strong 47,276-unit sales in January, rising 38.9 per cent from 34, 043 units, year-on-year.
According to the Society of Indian Automobile Manufacturers data, last month, two-wheeler sales grew 11.4 per cent to 6,77,390 units, from 6,08,011 units in January last year.
The three-wheeler segment saw a moderate 3.1 per cent growth with sales of 35,527 units against 34,457 units in January 2006.
In the ten months to January, domestic passenger car sales rose 22.8 per cent to 8,69,619 cars, while commercial vehicle sales shot up 37.4 per cent to 374,315 units.
Rising income levels helped in boosting sales.
Analysts expect the good growth in sales to continue for the next two months of this financial year. They, however, believe the hardened interest rates and the increase in prices are likely to tame the exuberance to some extent.
"The strong sales portray general buoyancy in the economy as well as the speculative buying by customers on pre-hiked prices. The increase in prices and the hardened interest rates will impact sales, but they are still expected to register double-digit growth till the end of March," said Arvind Jain, auto analyst at Religare Securities.
Meanwhile, automobile exports too grew 26.1 per cent to 77,243 vehicles in January this year, from 61,274 in January 2006.
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