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Monsoon hope revs up rural car sales

Business Standard:  July 18, 2017

New Delhi:  Car sales in rural areas during the first quarter have grown in double digits on expectations of a normal monsoon. Market leader Maruti Suzuki reported 30 per cent growth in sales volume in the rural market and Hyundai clocked 23 per cent.

For both companies, which together control about 67 per cent of the Indian car market, the pace of growth in rural markets is significantly higher than overall sales growth. Maruti Suzuki sold 134,624 vehicles in rural markets during April-June, up 30 per cent from the 104,059 vehicles sold in the same quarter a year ago. The company’s total sales in the country grew 14 per cent during the quarter.

The India Meteorological Department last month raised its estimate for this year’s monsoon rainfall to 98 per cent of the long-period average from an earlier forecast of 96 per cent.

“The forecast gives a fillip to sentiment. Our growth of about 29 per cent is in line with our expectations and we are on course to meeting our annual targets,” said a Maruti Suzuki spokesperson.

Hyundai sold 18,337 vehicles in rural markets during April-June, up 23 per cent from the 14,879 vehicles in the same quarter a year ago. These are sales to dealers and indicate increased confidence among buyers. Hyundai’s overall domestic sales growth was less than one per cent during the quarter.

“The implementation of the goods and services tax has made cars slightly more affordable and the market is showing improved customer sentiment. This will help the industry to move into a strong growth trajectory,” said a Hyundai executive.

Hyundai’s reach in the countryside is limited by its 300 rural outlets and the company is using float vans to sell cars. The company has 70 float vans that move in various rural markets.

Leading car makers have been expanding their sales and service networks in rural markets. “Customer-connect initiatives help us in reaching out. Special tie-ups with banks also enhance reach,” the Maruti spokesperson said.

Growth in rural vehicle sales is likely to accelerate during the current quarter, which marks the beginning of the festive season.

Other beneficiaries of an ample monsoon rainfall will be tractors and two-wheelers.

Tractor sales in the country are poised near a record 650,000, growing in double digits for the second consecutive year. This phase of growth had started in 2016-17 after back-to-back years of deficient rain.

Growth of two-wheeler sales in the country is also expected to top the 2016-17 performance of seven per cent.


Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.