Auto sector bets on rural market to boost sales

It's a torrid time for the auto industry. Hit by the worst slump in a decade the industry is staring at yet another forgettable year. Despite the doom and gloom in practically every developed city of the country, it is the rural belt that is saving the industry the blushes reports CNBC-TV18’s Ronojoy Banerjee.

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Auto majors from Maruti Suzuki, Hyundai to Mahindra and Mahindra (M&M) are quietly putting in place a strategy to woo the discerning rural customers in areas with an addressable market of at least 50,000 potential buyers. Despite the industry slumping almost 10 percent, the rural markets however have grown at an astounding 20 percent.

A clutch of factors ranging from easier finance to good monsoons has helped increase disposable incomes. Maruti Suzuki's rural sales have risen to over 30 percent versus 5 percent five years ago.
Mayank Pareek, COO - Marketing & Sales, Maruti Suzuki says "One positive is rural. Overall our sales have declined by 4 percent but our rural growth has been 30 percent. Currently, our share of rural sales stands at 30 percent."
Since April this year Maruti has opened over 20 new sales outlets in these regions. Rival Hyundai too is increasing its rural focus. Over the next six months the company will add 80 rural sales outlets to its existing 270.
According to Rakesh Srivastava, senior VP - Sales & Marketing, Hyundai, in the last two years there has been a noticeable upward sales trend. In 2011 around 15 percent of sales came from the rural and semi urban markets. In 2012, it grew to 16.9 percent and in 2013 it grew to 18.6 percent and we expect it to increase to over 20 percent by 2014."
M&M, which has the strongest rural presence owing to products like the Bolero, says its share will only go up. Currently, 37 percent of M&M's sales come from these markets up from about 32 percent till a few years back. The company is tying up with financial institutions like regional rural banks for boosting rural sales.