Home >Companies >News >Maruti banks on rural sales to get back on road to recovery

NEW DELHI : Maruti Suzuki India Ltd expects rural demand to help revive vehicle sales in 2020-21. It also expects pre-owned vehicle sales to pick up, as customers are likely to cut back on discretionary spending in a post-covid-19 world.

Shashank Srivastava, executive director, marketing and sales, Maruti Suzuki India, said in the past decade, sales growth in rural areas was more than what Maruti witnessed in the urban market. Rural market sales grew from 7-8% in FY08 to 38-39% in FY20.

“This has been the trend before covid-19 and the expectation that it will continue is reasonable and logical. The rabi crop has been very good and farm incomes will be higher as a result. The effect of covid-19 seems to be more in urban clusters than rural areas. So, that part is also positive," he said.

“The negative is that some urban activity-led income, which used to go back to rural areas through migrant labourers, will be a little impacted. Rural sales will bounce back quicker," he said.

The maker of Alto and Swift hatchbacks had a tough year in FY20 with the economy slowing down and the increase in vehicle prices following the change in emission and safety norms. The covid-19-led lockdown compounded the misery of vehicle manufacturers like Maruti, as retail sales have crashed since March.

Maruti, which was bracing for a tough period this year due to lack of products in the sport utility vehicle segment and diesel models, may now be in an advantageous position compared to its peers, said investors.

According to Srivastava, during economic stress, people gravitate towards more reliable and established brands and customers are expected to downgrade their choice for more affordability.

Maruti’s strong financials, wide dealer network in rural areas, and a thriving used-car business will stand it in good stead in the short to medium term. Online sales may also help it gain further momentum, said experts.

“Our share in the organized market of used cars is almost close to 60% but then we would like to expand this organized market because today it’s about just 18-20% of the total used car market. There will be a transfer of demand to used cars, but there will be a transfer of demand from used cars to maybe two-wheelers for example," said Srivastava.

“Last year, when the overall new car market dropped by 18%, there was a 10% growth in used cars. So, that trend has been there and I think it will continue," said Srivastava.

Fearing a sharp decline in footfall at dealerships in the coming months, automobile manufacturers are focusing on selling their cars through online portals. Maruti, like its competitors such as Hyundai Motor India, Honda Cars and others, will also push the usage of digital mediums to ensure less contact with the consumers.

The company though is convinced that the entire process may not be conducted without the physical presence of the prospective customer.

“There are 28 touchpoints that a customer has to go through till the actual delivery of the car, according to our survey, and out of that 17 to 21 touchpoints were already digitalized. What OEMs including Maruti are trying to do is to make these 28 points as much digital as possible. Now, car delivery and test drive will have to be physical," added Srivastava.

Meanwhile, Maruti Suzuki on Monday said that Suzuki Motor Gujarat (SMG) has resumed manufacturing operations after having suspended work for more than two months due to the virus lockdown.

SMG manufactures cars in Gujarat on a contract basis for Maruti.

The facility, which rolls out two models—Baleno and Swift—currently has an installed production capacity of 5 lakh units per annum. Maruti has already commenced operations at its two plants in Manesar and Gurugram.

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