Rural India Drives Auto Boom

16 Jan 2024 , 10:38 AM

Amidst stronger consumer attitudes and higher liquidity among the rural rich, Maruti Suzuki, Hyundai Motor, Tata Motors, and Renault India recorded the highest-ever share of sales from rural markets in the calendar year 2023. Nonetheless, rural consumers’ desire for durable goods and fast-moving consumer items was affected by inflationary pressures.

While the leading automaker in the nation, Maruti Suzuki, saw a 45% increase in its rural sales share in CY2023, Hyundai’s share was 19.1%, and Tata Motors and Renault India’s shares were 40% apiece.

The income disparity between different consumer groups has been driving demand, according to senior industry executives, especially in rural regions. This is projected to finally trickle down and create a broad-based rebound over the coming quarters.

‘At Maruti Suzuki, rural markets grew by 10.4% last year, outpacing metropolitan centres. Our current rural penetration rate is 45%, the greatest the company has experienced in a number of years, according to Maruti Suzuki’s senior executive officer of marketing and sales, Shashank Srivastava. The manufacturer of the Swift and Celerio automobiles had a 7.3% increase in urban sales last year. In the local market, Maruti Suzuki sold 1.71 million vehicles in total in 2023.

Tarun Garg, COO of Hyundai Motor India, agreed: ‘The demand for cars in rural areas is still high. The government’s emphasis on building road infrastructure, increased minimum support prices for crops, and regular monsoons have given consumers greater purchasing power, which is boosting the demand for vehicles.’

The third-biggest automaker, Tata Motors, recorded its highest-ever sales proportion from rural markets in 2023. The company’s rural sales increased by 10% during the course of the year, accounting for 40% of overall volumes. Overall, PV sales last year at Tata Motors climbed by 5%.

In the last ten years, the 1.4 billion-person country of India has relied more and more on sales of branded everyday necessities items from rural areas, where over 800 million people live and whose purchasing patterns are strongly influenced by agricultural output.

But demand in rural areas, which was expanding twice as quickly as in metropolitan areas, has decreased during the last three quarters. Due to rising rural inflation, sales of FMCG and consumer durables have been under pressure, significantly reducing discretionary spending among consumers who are cost-conscious.

However, greater farm output has been putting more money in the hands of consumers at the upper end of the market supporting double-digit increases in car sales and, more lately, two-wheelers.

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