NEW DELHI: Maruti Suzuki India Ltd, the country’s largest passenger vehicle manufacturer, is betting on an uptick in rural demand for a recovery in vehicle sales in the current fiscal year.
The New Delhi-based company will also aggressively push its used car business in the coming months as sales of pre-owned vehicles are likely to pick up as affordability had taken a hit due to the covid-19 pandemic.
According to Shashank Srivastava, executive director, marketing and sales, Maruti Suzuki India, in the last ten years growth in rural areas has been more than in urban areas. Sales of Maruti’s vehicles in rural markets have gone up from 7-8% of the total in 2007-08 to 38-39% last fiscal.
“This has been the trend before covid-9 and the expectation that this 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 in rural areas. So that part is also a positive," he added.
The negative is that some of the urban activity-led income, which used to go back to rural areas through migrant labourers, might be impacted, he added. "Rural sales will bounce back quicker."
The maker of Alto and Swift hatchbacks had a rough FY20 as an economic slowdown and increase in vehicle prices due to changes in emission and safety norms shrunk demand.
Now the covid-19 outbreak has compounded the misery of vehicle manufacturers like Maruti, as retail sales have crashed since March due to the lockdown.
Maruti, which was bracing for a tough period this year due to lack of offerings in the sport utility vehicle segment and diesel variant cars, is now said to be in an advantageous position compared to its peers due to its strong financials, wide network in rural areas, and a thriving used car business.
According to Srivastava, during economic stress people gravitate towards more reliable and established brands and customers are expected to downgrade their demand due to declining affordability.
“Our share in the organized market for 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 not only be a transfer of demand to used cars but there will be a transfer of demand from used cars to two-wheelers, for example. Last year, when the overall new car market dropped by 18%, there was a 10% growth in used car sales. So that trend has been there and I think it will continue," added Srivastava.
Fearing a sharp decline in footfalls at dealerships in the coming months, automobile manufacturers are focusing on selling their cars through online portals. Maruti, like its competitors Hyundai, Honda and others, will also push digital mediums to ensure low contact with 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 touch points that a customer has to go through till actual delivery of the car, according to our survey, and of those 17 to 21 touch points were already digitalised. What OEMs, including Maruti, are trying to do is to make these 28 points as digital as possible. Car delivery and test drives will have to be physical," added Srivastava.