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Auto makers look to small towns for growth

Top auto companies, including Maruti Suzuki, Hero Honda and General Motors, have seen sales in rural India go up in the last six months, reports Sumant Banerji.

autos Updated: Jan 26, 2009 22:30 IST
Sumant Banerji

With finances drying up and footfalls dwindling in urban centres, automotive manufacturers are witnessing greater promise of growth in rural markets. The all-cash economy and low penetration levels in rural areas is what makes the segment attractive for major auto makers.

Top auto companies, including Maruti Suzuki, Hero Honda and General Motors, have seen sales in rural India go up in the last six months.

For car market leader Maruti Suzuki, top 10 cities, including Bangalore, Chandigarh, Hyderabad, Ahmedabad and Pune besides the four metros, which accounted for 47.7 per cent in 2005-06 have now come down to 42 per cent in 2008-09 (till December). Simultaneously, share of sales in tier 4 cities (160 cities) have grown from 21 per cent to 24 per cent.

The company’s flagship panchayat scheme for rural India has also seen tremendous growth. From 20,826 units in 2007-08, the company has sold 45,241 units in this fiscal under the scheme, a growth of 112 per cent. This at a time when its overall sales have dipped by 2.66 per cent.

“The market in urban centres is saturating and there is higher demand in rural areas,” a Maruti spokesperson said.

Other companies have similar stories to share. “Despite the various initiatives taken by the government to inject liquidity into the financial system, there is very little change at the ground level,” said Anil Dua, senior vice-president, marketing and sales, Hero Honda Motors.

Similarly, General Motors too is looking for markets outside the voluminous metros and is running schemes particularly to that end.