India's top passenger vehicle manufacturer Maruti Suzuki India Ltd is looking to penetrate the rural market to a greater degree, in an attempt to further boost their sales volume and margins. During the first quarter of this year, in which Maruti was able to almost double its revenue, deliveries in small towns and villages were more than those in big cities. Mayank Pareek, Maruti Sales and Marketing head, said that the company would be looking to elevate marketing expenditure to target customers residing in the countryside. At present, the company has a presence in about 50,000 of the country's 650,000 villages.
Speaking about the potential of the rural customer base, Pareek said, “In villages, customers come with bags of cash and select a car and want it there and then. What we’ve done so far is just the tip of the iceberg, and we can really penetrate more and do wonderful work.” Sales numbers clearly indicate the true picture, as deliveries in rural areas were responsible for 28 per cent of Maruti sales in the fiscal year that ended on March 31 2013, which is clear leap from 4 per cent that was achieved three years ago. Despite a rise of only 4.4 per cent in the total business during FY 2012-13, small town sales went up by 15 per cent.
Deepesh Rathore, managing director at top consulting firm IHS Automotive said that sales in the country's rural landscape would depend on harvests, which in turn would be based on the good monsoon. Reportedly, 55 per cent of the country's farmland relies on irrigation water from the rains.
With a total of 1100 dealerships across India, Maruti has three times more number of outlets as compared to its closest rival, Hyundai Motors. Half of these showrooms are present in rural areas.
Supporting this new strategy, Juergen Maier, Vienna-based fund manager at Raiffeisen Capital Management said, “Maruti has the volumes to justify having dealerships in small towns, something that Toyota or even Hyundai wouldn’t be able to do. It’s a good strategy for Maruti to focus on rural markets as incomes in rural areas are still growing.”
As road connectivity continues to improve across small towns and villages, more people are now purchasing small cars for personal use, said Pareek. Rural prosperity is steadily on the rise, resulting in aspirations similar to those living in larger cities. A boost is also being given by the Union Government, as Prime Minister Manmohan Singh has agreed to spend $146 billion on enhancement of transport infrastructure throughout the country. Interestingly, per-capita spending for rural customers has grown faster than urban dwellers between March 2010 and March 2012, for the first time in 25 years. This definitely augurs well for the future of the Indian automobile industry, as other auto makers such as Mahindra & Mahindra also look to tap the rural market potential. Interestingly, the Sports Utility Vehicle (SUV) Bolero from Mahindra sells many more units in rural areas than urban areas.