Sunday, January 24, 2010

Robust rural market fuels car sales

Rising income levels, easy credit and better roads push up numbers.


Manu P. Toms

Mumbai, Jan. 24

Car makers are making greater inroads into rural markets with industry majors reporting 50-100 per cent rise in sales in such regions in the current fiscal.

Market leader Maruti Suzuki's rural sales more than doubled to 1.16 lakh cars in April-December. Others such as Hyundai, GM and Mahindra & Mahindra have also seen higher growth.

For Maruti the share of rural sales this year increased to 16 per cent from 9 per cent last year.

Hyundai, the second major player, noticed that the shares of its tier-2 and tier-3 markets' sales – largely rural and semi-urban – grew to 29 per cent from 23 per cent.

Both manufactures together hold 70 per cent of the Indian car market.

“We did better than the car industry in general, largely because of our rural focus. The contribution of rural India in our overall sales is growing year by year,” said Mr Mayank Pareek, Executive Officer, Maruti Suzuki.

Maruti has loosely classified areas beyond the top-80 cities as rural market and has been carrying out sales promotion activities in tie-up with schools, panchayats and local clubs.

Holding on to its rural focus, the company recently launched the multi purpose vehicle Eeco at an attractive Rs 2.6-3 lakh price range.

“Our sales in the top-10 markets have declined from 53 per cent to 46 per cent. However, in tier-2 and tier-3, we are growing,” said Mr Arvind Saxena, Senior Vice-President, Sales & Marketing, Hyundai Motor India Ltd.

The easy ride of car makers, whose combined sales this fiscal is 25 per cent up at 16 lakh units, has got a strong push from rural India and this bears testimony to the rising income in villages.

“The Indian car makers have identified a ‘prosperous rural customer segment',” said Mr Kapil Arora, Partner, Automotive Practice, Ernst and Young India. “In relation to its size, rural India still remains largely under-penetrated, and clearly demand is growing there. Aspirations are growing along with rising prosperity. The macro-economic factors such as easy credit and improving road connectivity in interiors also contribute to the sales growth,” he said.

“If the top-eight cities used to contribute 60 per cent of the total sales and 40 per cent the rest earlier, it is the other way around now,” said Mr P. Balendran, Vice-President, General Motor India.

Mr Rajesh Jejuricker, Chief of Operations, Mahindra & Mahindra, has a similar view. “We continue to see a robust growth in rural and semi-urban markets. This year our overall sales grew by 35 per cent. The rate of growth is even higher in non-metro markets,” he said.

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