Global automakers scour India's rural backroads in search of dream market
As economic torpor suffocates the demand for new cars in India's mega cities, global automakers are turning to rural India in search of a new business El Dorado.
As incomes are growing faster in small towns and country areas, automakers such as General Motors and Honda Motor Co. are fanning out in search of buyers in places where fewer than 20 people out of a thousand own a car - for now.
Standing firmly in the way are strong home-grown brands. With local services plentiful and repairs cheap, Maruti Suzuki India Ltd, Mahindra and Mahindra Ltd, and Tata Motors Ltd dominate the rural vehicle market where foreign automakers are seen as expensive and distant.
Harkrishan Singh, an owner of an Audi A4, living in a village in Punjab, says cars in villages have become an essential part of one's life, and therefore, people don't hesitate in spending more money.
Earlier people in the villages use to hesitate in spending money, but now to upgrade their living standards they are also buying the cars that are popular in the market. Even their children, who go to schools in big cities where they see their classmates driving in cars, put pressure on their parents to buy similar cars. And, that is how this culture is seeping in," said Singh.
Car makers see success in rural areas as vital, as slow economic growth, high interest rates and rising fuel prices mean overall sales are headed for their second straight year of decline. Though the need for rural sales has been recognised, success could yet prove illusory.
Principal dealer for Universal Motors in Amritsar, Ranjeet Singh Sandhu, said: "More than 70 percent of India resides in rural areas, and as the wealth trickles down into the rural areas, they are coming out to buy not only automobiles, but other things also. The trend started from fast moving consumer goods. So, they started setting up shops in rural areas. Now, their incomes are going further up. So, they also want to be noticed and be seen and want everyone to know that they are not far behind their urban cousins now," said Sandhu.
Maruti's deep rural penetration has helped it defend its market share amid the industry's two-year downturn. That is despite the onslaught of new models launched by foreign rivals.
At the ongoing Auto Expo 2014 in Greater Noida, Uttar Pradesh, the Managing Director and Chief Executive Officer of Maruti Suzuki India Limited, Kenichi Ayukawa, said: "We have grown impressively in rural sales. We will touch 100, 000 villages this year but there is another half million to go. We will set up our sales network to reach out to these areas."
Foreign companies showing cars at the Delhi auto show, that started Wednesday, have already poured billions of dollars into factories, product development and marketing in India's once-booming car market.
Still, no foreign car maker has a share of more than six percent in India's passenger vehicle market aside from South Korea's Hyundai Motor Co with 15 percent.
Senior Vice-President and Division Head (Marketing and Sales) for Hyundai, Rakesh Srivastava, said: "In times to come, with the economy improving things will improve so we are targeting the first time buyers, the additional buyers and the repeat buyers for which we are working strongly in terms of rural. We would be opening up almost around 300 rural outlets, we have currently almost 270 of them with 400 dealership showrooms and almost around 1100 service workshops, which will assure our customers on the quality of the products and our sale service performance."
India's is the sixth largest car market, pertaining to its emerging middle class and large population. But, the poor quality of roads and often unmanaged traffic also makes the population highly prone to road accidents, with nearly 140,000 people dying every year in such accidents.
Small cars are top sellers in a country where most people prefer to drive cheaper, fuel-efficient compact cars as roads are clogged with traffic and parking in big cities is hard to come by.
(Posted on 07-02-2014)