The Hindu Business Line : Carmakers target small towns for growth

Rural thrust
In April-October, Maruti sold 36,000 cars in rural markets against 16,500 units in the same period last year
40 per cent of Hyundai’s sales come from small towns and rural areas
Rural economy not impacted much by credit crunch

Manu P. Toms

Mumbai, Nov. 21 Carmakers are looking beyond metros to boost sales at a time when the market is in the midst of an unpredictable slowdown.

In fact, companies with a strong presence in rural and semi-urban India are already drawing up aggressive strategies to meet the challenge head-on. Quite unlike the cities where people are losing jobs or seeing their wealth erode in the stock market, income in this part of the country is a lot more steady and reliable, manufacturers say.

“We saw this downtrend happening well in advance and decided to renew our focus on rural markets from April this year. The results are there for all to see. Between April and October, we sold 36,000 cars in rural markets against 16,500 units in the same period last year,” Mr Mayank Pareek, Executive Officer, marketing & sales, Maruti Suzuki, told Business Line.

According to him, rural markets are largely insulated from the credit crisis as fewer customers opt for vehicle financing. To that extent, these are typical all-cash markets.

Maruti has 400 dealers in semi urban and rural areas. Mr Pareek said more sales were coming from these centres in recent months. “Earlier, the top 10 cities used to contribute about 47 per cent of sales. Now we see growth in non-metro centres,” he added.

The company’s volumes were eight per cent down to 59,000 units in November. “We have been able to arrest the downtrend to a large extent thanks to good sales in semi-urban and rural areas,” Mr Pareek said.

Maruti’s sales people in Bangalore concurred, pointing out that while there was eight per cent de-growth in Bangalore city, it was offset by 16 per cent growth in the rest of Karnataka.

Hyundai Upswing

Close challenger Hyundai is also leaving no stones unturned to push growth in rural areas. Mr Arvind Saxena, Vice-President, sales & marketing, added that sales in non-metro centres were on the upswing.

According to a spokesperson, this will be top priority this year even while dealerships are being increased to 280 from 240. Nearly 40 per cent of Hyundai’s sales come from small towns and rural areas.

The change in focus holds equally true for utility-vehicle maker Mahindra & Mahindra, largely because non-metro centres are not affected by the liquidity crunch.

“So far, we have not seen any slowing down in non-metros, semi urban and rural areas. Our Bolero pickup and three-wheeler still see robust growth,” Mr Rajesh Jejurikar, Chief of Operations, M&M, told Business Line.

“That is primarily because these are used in agrarian economies which are not impacted as much by the liquidity crunch since they are in good shape. The issues are really for those towns and markets aligned to the events of the stock market,” he said.

According to Mr Jejurikar, a large part of our portfolio, including 40 per cent of Scorpio sales, emanates from non-urban markets. “We are not as impacted as some organisations which are metro-centric but whether this continues remains to be seen,” he said.

Public sector banks are also doing their bit in rural areas and small towns as Mr P. Balendran, Vice-President, corporate affairs, General Motors India, pointed out. The company’s compact car, the Chevrolet Spark, is driving into rural markets quite aggressively.