Why Maruti, Hyundai are still betting on Bharat

With car penetration of around 22 per 1,000 population, India continues to be a big opportunity to sell cars, especially in rural areas.

Illustration: Uttam Ghosh/Rediff.com

The country’s largest two carmakers, Maruti and Hyundai, managed to increase their rural sales in 2018-19.

This took place despite the rural economy being under pressure.

Both companies are optimistic about 2019-20, too, with the raising of rural allocations in the Union Budget and higher Minimum Support Prices.

That means more of rural disposable income.

Maruti Suzuki’s (the country’s largest car maker) rural sales in 2018-19 rose to 205,000 units or 39 per cent of sales.

A year before, it was around 165,000 units or 37 per cent of sales.

This year’s outcome will depend on the monsoon, farm output and how rural sales pick up.

Hyundai’s rural sales were 17.3 per cent of its FY19 total, as against 15.6 per cent a year before.

In FY20, the contribution is expected to be around 20 per cent.

Both companies - they address most of the spectrum - have said they are optimistic on the future, despite the overall industry having slowed.

According to the Federation of Automobile Dealers Associations, passenger vehicle sales dropped by 4.6 per cent in FY19, to 224,755 units.

Shashank Srivastava, executive director for marketing and sales at Maruti, estimates growth of 4-8 per cent for the current financial year.

However, he adds, a good monsoon and a satisfactory (for sales) festival season would be important, he adds.

With car penetration of around 22 per 1,000 population, India continues to be a big opportunity to sell cars, especially in rural areas.

Srivastava says the rate of growth in the rural market has invariably been higher in recent years.

“Today, with booming internet users and a strong millennial population, rural markets are emerging as growth engines for sales,” he says.

Further, rural infrastructure has improved significantly.

Motorability has seen sharp improvement there, resulting in exponential increase of two-wheeler sales and offering similar potential for cars.

Vikas Jain, national sales head at Hyundai Motor India, says customers of urban and rural markets might have differing needs but similar aspirations. In the latter, owning a car is a big aspiration.

Urban markets are experimenting with mobility solutions such as subscription and leasing.

Hyundai has a partnership with self-drive car rental firm Revv and another with mobility solutions firm ALD Automotive India.

The company believes there is huge aspiration among youth in tier-1 and tier-II cities to own a vehicle.

Rising disposable income and the expanding presence of financial institutions in rural markets, to offer credit at attractive rates, will enable ownership of cars.