SUV sales may be on the rise in rural India

24 May 2024 , 11:46 AM

The top three vehicles sold by Hyundai Motor in rural India between January and April of 2024 were all SUVs, pushing the Grand i10 little car off the podium for the first time. This indicates the rising aspirations and disposable income of Indian rural consumers.

As the difference in consumer preferences between urban and rural areas narrows due to more digital exposure and income parity, competing brands like Maruti Suzuki, Honda, and Tata Motors are also witnessing a surge in demand for their more expensive SUVs from the hinterlands.

Tarun Garg, chief operating officer of Hyundai Motor India, stated that “the income gap between car buyers in rural versus urban areas has come down sharply over the last five years.” “In the last one year itself, we have seen the number of first-time buyers go up 300 basis points to 44% in rural areas,” he stated to ET.

Two-thirds (67%) of Hyundai’s rural sales in the first four months of the year were made up of SUVs such the Exter, Venue, and Creta, which is a doubling of their percentage from 2020.

In FY24, rural areas accounted for 43% of sales of Maruti Suzuki’s highest-selling SUV, the Brezza, while SUVs accounted for 70% of all automobiles sold in rural markets by Tata Motors.

According to Honda Cars India, tier 3 and nearby areas account for 25% of sales of the company’s recently introduced SUV, Elevate.

Areas classified as rural by the Reserve Bank of India are those with fewer than 49,000 residents (Tier 3-6).

Automobile manufacturers credit improved roads, rising incomes, and aspirations for the surge in demand for SUVs in rural areas.

According to a State Bank of India (SBI) report, the gap between rural and urban poverty has shrunk, with rural poverty falling by 440 basis points between FY19 and FY23 compared to an urban reduction of 170 bp. From 25.7% in FY12 to 7.2% in FY23, rural poverty decreased. Urban poverty decreased from 13.7% to 4.6% in the same time frame.

The amount of money allotted to rural development projects in the budget has increased recently, rising by 12% to ₹1.77 Lakh Crore in FY25. There has been an improvement in road connectivity, and this fiscal year the Centre plans to build an additional 12,000 km of highways.

The use of cellphones has surged concurrently. More than 700 million people in India use smartphones, 425 million of them live in rural areas.

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