Mumbai/New Delhi: Increased disposable incomes through the sale of land, higher farm output, smoother roads and an improved law and order situation in states such as Bihar helped drive the sales of utility and multi-utility vehicles in villages and smaller towns in the first 10 months of the current fiscal, according to dealers and executives of auto firms.
Sales of utility vehicles in India rose 13% to 291,333 units from a year ago, according to the Society of Indian Automobile Manufacturers (Siam), even as sales of passenger cars contracted 1.19%.
Toyota Kirloskar Motor India Pvt. Ltd has seen a shift in the sales patterns for Innova, its multiple purpose vehicle. Rural and semi-urban areas contributed to 40% of the vehicle’s sales, up from 25% last year.
Like other car makers, Toyota believed that small cars and sedans sold well in such regions till it started receiving enquiries from dealers. “When we increased the number of dealerships in such areas because of Etios (sedan) and Liva (hatchback), we began getting lots of enquiries for Innova,” said Sandeep Singh, deputy managing director (marketing).
Toyota has also launched a pilot programme as part of which dealers have been asked to set up so-called dummy showrooms in smaller towns and rural areas where the company does not have a presence. “We need to reach out to the customers if they can’t reach us,” said a Hisar, Haryana-based Toyota dealer.
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Emboldened by the buoyant sales, auto makers are introducing more utility vehicles. At January’s Auto Expo in Delhi, auto makers such as Maruti Suzuki India Ltd, Renault India Pvt. Ltd, Ford India Pvt. Ltd, Hyundai Motor India Ltd, among others, showcased utility vehicle offerings.
The segment market leader, Mahindra and Mahindra Ltd, has seen the increased contribution of such regions to overall sales.
“We have seen demand for vehicles like Scorpio rising at a faster pace in (areas such as) Lakhimpur Kheri (Uttar Pradesh) and Muzaffarpur (Bihar),” said Arun Malhotra, senior vice-president, sales and customer care.
Besides disposable incomes, he also attributed the trend to an increase in the number of sales?and?service outlets which, in turn, has fed demand.
A car dealer in east India, who declined to be identified, said?buying?habits?had changed in the last couple of years.
“There has been a change of governments in Bihar, Jharkhand and West Bengal. The new governments have brought in change in terms of social security, unlike the past, when people were scared of buying a car,” the dealer said. “Now they are willing to spend freely. Apparently, in Bihar, there are numerous examples where customers have made 100% cash purchase, rather than relying on loans. People of these states always had money and now with the local economy on track their aspirational levels have gone up.”
Mahindra sells at least 150 Scorpios every month in Bihar, he said. “The enquiries for the XUV 500, its new sports utility vehicle, are just not stopping. This is despite us telling the buyers that Bihar would only get deliveries of this vehicle once Mahindra reopens bookings,” he said.
The company hasn’t begun selling the vehicle, launched in September 2011, in at least six states, including Bihar, said Pawan Goenka, president, automotive and farm equipment sector, Mahindra.
“We did not anticipate this kind of demand for XUV from states like Bihar and Jharkhand. We are not happy with this fact. We are trying to meet demand by increasing capacity at our plant,” he said.
Aspirations are rising in the villages and smaller towns, said Pradeep Lokhande of Rural Relations, a consumer rural relations organization.
“After a colour television, a vehicle is the next big-ticket item on their shopping list,” he said. “This has been further helped by the easy availability of finance.”
Government rural infrastructure programmes such as the Pradhan Mantri Gram Sadak Yojana have spawned several small contractors who are among the major buyers of utility vehicles, Lokhande said.
Besides that, with land prices surging, even sellers of small plots are flush with cash. An ever-widening road network is adding to this.
“The real growth is happening (in utility vehicles) because of the government’s road development programmes. Such programmes have a huge multiplier effect,” said Mahantesh Sabarad, senior vice-president (equity) at Fortune Equity Brokers (India) Ltd.
The dealer cited above said more companies are setting up outlets in areas such as the interiors of Bihar, thanks to a greater sense of security.
“Now you have everybody here, be it Toyota, Honda or Chevrolet. Earlier, it was limited to the big three—Maruti, Tata Motors Ltd and Hyundai.”