Rural markets are the new cash cow for car makers
NEW DELHI: After the initial blip, comes some good news.
Car sales in villages are recovering faster than in metros and big cities. Sales have fallen around 25% in November after the government announced its demonetisation exercise.
“Rural sales in November were down 11%, over last year, but in the month of December it was up by 18%... Rural sales have recovered very fast,” said RC Bhargava, chairman of Maruti Suzuki, India’s largest carmaker. Maruti’s recovery represents the industry, he added.
Hyundai Motor India, India’s second-largest car maker, too, shared similar trends. The automaker’s share of rural sales has gone up by 1% to 24.5% in December, from 23.5% in November. Rural sales had fallen 15% in November, but the company is expecting a 35% growth in December.
“In November, sales dipped, but the main reasons why December is a good month include latent demand from November, festive season sales, positive sentiment from good crop and the marriage season,” said Rajesh Srivastava, head of sales and marketing at Hyundai.
Maruti and Hyundai make for more than two third of the country’s passenger car sales. Tata Motors, Nissan, Mahindra & Mahindra and others, too, are witnessing rural growth.
The shift is against popular belief that car companies will face late recovery in smaller towns and villages. Analysts had said that the fallout in rural sales would be much higher since small towns use more cash to buy cars.
But cash crunch has been lesser in smaller town and cities, and banks have also played an important role. “More cash was transferred to rural areas compared to cities,” said the CEO of one of India’s top three private banks.