Car makers go rural to tap new prosperity

Struggling for growth, domestic carmakers are tapping into rural markets that are showing more resilience than their urban counterparts.

Companies such as Maruti, Hyundai, Mahindra, General Motors and Ford say that they are witnessing greater footfalls at their showrooms and better consumer sentiment in small towns, as the big cities that account for a bulk of their sales, are reeling under the slowdown.

"In the last few years, rural markets have seen a strong and steady demand," said Mayank Pareek, chief operating officer-marketing and sales, Maruti Suzuki India Ltd. "Just five years ago, our share from the rural markets was just 3.5%. Last April, it was 29%. This is likely to go up further."

It may not be too surprising that Maruti, which has the largest reach in the market, has a healthy share from non-urban areas. But others have begun to narrate similar stories. Rival Hyundai recently began a new inititative to increase its outlets in rural India from 270 to 350 by the end of this year.

"Rural sales are a key part of car sales strategy. In the last two years, there has been a noticeable upward trend," said Rakesh Srivastava, senior vice-president, sales and marketing, Hyundai Motor India Ltd. "The rural markets are growing on account of growing income and change in lifestyle. In 2011 around 15% of sales came from the rural and semi urban markets. In 2012,it grew to 16.9% and we expect it will increase to over 20% by 2014."

Primarily due to large families and the dependence on agriculture, which is seasonal in nature, rural India is also a big market for utility vehicles, which has stood Mahindra and Mahindra in good stead. Almost 65% of the sales of its Bolero happen in the hinterland.

"Our overall sales have gone up in upcountry locations from 25% to 40% in the past 4 years," said Pravin Shah, chief executive, automotive division, Mahindra and Mahindra. "The Bolero is popular there as it is tough, rugged and reliable. Further, with a seating capacity of 7 it is considered a big vehicle and a status symbol in rural India while meeting personal and commercial transportation needs of the rural population."

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