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No brakes on car sales in rural markets

It may not be the best of times for rural sales of tractors and two wheelers, especially motorcycles, which have seen decline in volumes. But car sales are still growing, indicating a lesser impact of rural distress on car buyers. There has been a softening in demand but players are still posting double digit growth.

The country’s largest car manufacturer, Maruti Suzuki, has seen its rural sales grow by a decent 12% in the first three quarters of the ongoing financial year. The October-December quarter, a period of festive demand, saw a higher growth of 15%. In fact, the growth of 12% in rural sales is not significantly different from the overall domestic sales growth of 14% seen by the company in the first three quarters. About one-third of Maruti’s sales come from rural markets, the highest for any car maker in the country.

A Maruti Suzuki official said that buyers in rural market include small farmers, prosperous farmers and salaried individuals working with banks, educational institutions, etc. “It is mostly the first category of buyers that are withholding purchases. We are trying to find new segment of buyers and will add many more villages,” he said.

The country has seen two consecutive deficit monsoons, impacting the farm-based rural economy. Sales of motorcycles declined 2.5% in first nine months of the current financial year when sales of scooters, largely an urban product, grew by 11.40%. Rural markets account for more than half of motorcycle sales. Tractor sales of Mahindra & Mahindra, the largest player in the market, declined 13% in the April-December period.

The countryside’s contribution to passenger vehicle (cars, utility vehicles and vans) sales had climbed in recent years, helped by employment generation schemes, a surge in land prices and increases in support prices of crops. Maruti’s rural focus over the last seven years has helped countryside sales grow to 34% from 3%. The current year’s sales growth, however, is lower than the 23% growth seen by the company in 2014-15.

The second largest player in the domestic market, Hyundai, is posting an even higher growth though on a smaller base. In the last calendar year, its rural sales grew by a sharp 31% to 51,000 units and accounted for 11% of sales against 9% in 2014.

Rakesh Srivastava, senior vice-president (sales and marketing) at Hyundai Motor India said, “As a sales strategy, Hyundai is seeking active engagement with rural customers through its 330 rural sales outlets. While we are seeing growth in sales, we are also seeing a pronounced shift to premium segments and top-end variants”. The rural outlets of Hyundai are extension outlets that display 1-2 products and also offer service facilities. Srivastava, however, cautioned that if rural economy does not improve this year, the pressure could start impacting the hitherto unaffected segment of buyers.