Auto industry counts on rural markets for sales resurgence in H2

Original equipment manufacturers are expanding their networks in smaller towns due to the consistent growth in passenger vehicle sales in these markets. (Representation Image: Credit Pixabay)

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

With poor sales in urban markets leading to a lacklustre financial performance, the automobile sector is now counting on the rural belt to boost volumes in the second half of year 2024-25. Industry players reckon that a combination of a robust monsoon, more disposable incomes due to higher minimum support prices, a greater push on infrastructure projects and welfare schemes by state governments, among other factors, will result in a sales resurgence in semi-urban and rural markets.

Many automobile companies were hit by a weakening of consumer sentiment in urban areas. In fact, the slowdown in urban consumption had a negative impact on the second quarter earnings of major automobile companies such as Maruti Suzuki, Hyundai Motor India, Tata Motors and Ashok Leyland.

As per industry watchers, sales of passenger vehicles in urban areas in the first half of FY25 fell by nearly 3 percent compared with the same period a year earlier, while rural sales grew by almost 5 percent. As a result, OEMs or original equipment manufacturers are expanding their networks in smaller towns due to the consistent growth in passenger vehicle sales in these markets.

According to ICRA, industry wholesales in the recent past have been supported by improving rural demand on the back of normal monsoon precipitation.

“Rural demand in India has shown signs of recovery, positively impacting certain auto segments. This is influenced by factors like increased agricultural activity, better monsoon performance and government support through rural welfare schemes. Rural income levels are also seen rising due to improvements in crop yields and pricing, potentially boosting spending on vehicles,” said Srikumar Krishnamurthy, senior vice president and co-group head, corporate ratings at ICRA.

Industry players raise rural bets

The country’s largest carmaker Maruti Suzuki witnessed sales outside the metros grow by around 8 percent during the first half of FY25 compared with the corresponding period of the previous year, even as the urban market declined by 2 percent. A senior company official attributed the 10 percent on-year growth in retail sales of entry-level cars in October to a revival in the rural market.

"Rural did exceptionally well in October. We had strong a growth of 31 percent in the rural market last month and during April to October, we had a growth of 12 percent. This reflects better rainfall, good harvest, yield and minimum support price," said Partho Banerjee, senior executive officer, marketing and sales, Maruti.

SUVs and rural demand gave a fillip to Hyundai’s sales as well. “We also bolstered HMIL’s presence in the hinterland of India by achieving the highest ever monthly rural contribution of 22.1 percent in November,” Tarun Garg, whole-time director and chief operating officer of the Indian arm of the South Korean carmaker, said in a statement.

Two-wheeler wholesales over the recent quarters have been strong and one of the key supportive factors is the improving rural demand on the back of a normal monsoon precipitation, as per ICRA’s findings.

“There was a robust 14 percent growth in two-wheeler retails during the recent festive period window, aided by festive cheer and an improvement in rural demand. Dealers reported an increase in footfall and bookings. As per a channel check, enquiries and sales conversion were strong, particularly in the semi-urban and rural areas," said Krishnamurthy of ICRA.

Hero MotoCorp, a major player in the two-wheeler market, saw a growth of 13 percent in volumes compared to the festive season last year. A senior company official said sales were higher on the rural side and a little lower in urban markets.

“So that trend continues in terms of the (rural) participation, the positive momentum on more participation from rural markets. Over the medium term, we see that growth still doesn't have the full dividends of the bottom of the pyramid, which is yet to participate,” Hero MotoCorp CEO Niranjan Gupta said in an analysts' call.  He added, ““I would actually say as we move forward the next four to eight quarters, as the bottom of the pyramid starts participating more, this would actually benefit the economy.”