1. Falling bike and tractor sales are the latest signs of rural distress

Falling bike and tractor sales are the latest signs of rural distress

Crashing prices of crops, low wages and erratic rainfall have put pressure on the sales of motorcycles, tractors and entry-level cars in rural markets.

By: | New Delhi | Published: April 5, 2015 9:37 AM
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Crashing prices of crops, low wages and erratic rainfall have put pressure on the sales of motorcycles, tractors and entry-level cars in rural markets. (Express Photo by Tashi Tobgyal)

Crashing prices of crops, low wages and erratic rainfall have put pressure on the sales of motorcycles, tractors and entry-level cars in rural markets.

While motorcycle sales declined for the fifth straight month in February, data available with the Tractor Manufacturers Association (TMA) show that domestic sales of tractors were down by 10 per cent to 488,227 units between April 2014 and January 2015. The decline has been steeper in the last three months — a fall of nearly 30 per cent — on the back of lower than expected kharif crop output and unseasonal rains affecting rabi produce.

Sales of entry-level cars, too, dropped by around eight per cent to 492,556 units between April 2014 and February 2015. Sugato Sen, deputy director general, Society of Indian Automobile Manufacturers (SIAM), said, “Erratic monsoon, lower rural wages and drying up of funds under the NREGA scheme has meant that demand for two-wheelers has tapered off in rural areas. Entry-level cars are also under pressure on account of weak macro-economic environment.”

Latest data available with the Labour Bureau shows that rural wages in India registered an average annual growth of 3.8 per cent to Rs 266.26 in November 2014 — the lowest since July 2005. A slowing economy has led to drying up of job opportunities for rural migrant workers, especially in sectors like construction and manufacturing. The crash in prices of most crops has, likewise, hit farmer income. The emphasis on the job guarantee scheme, too, has weakened with the change of government, affecting wages in rural areas, say experts.

All this has started impacting demand. As per data available with SIAM, sales of motorcycles declined by 8.22 per cent to 774,122 units in February as compared to 843,436 units sold in the same month last year. In terms of absolute volume, motorcycle sales registered in February are the weakest in 28 months.

A spokesperson at Hero MotoCorp said, “Market sentiment in some rural areas has been impacted due to various factors, including the curtailment of NREGA spends, poor crop realisation and moderating wages. The industry has felt some impact in retail off-take in markets in Bihar and Madhya Pradesh and the sugarcane growing areas in Uttar Pradesh and Maharashtra.”

However, the company said this is not a nationwide phenomenon, with Hero MotoCorp clocking double-digit growth in some other rural markets, including West Bengal, Orissa, Karnataka, Uttarakhand and some parts of Uttar Pradesh. “With the onset of the marriage season in April, the industry expects the market sentiment to improve,” added the spokesperson.

Meanwhile, those in the small cars business, such as Maruti Suzuki and Hyundai Motor, have been increasing their reach in rural markets to offset risks. To sustain and grow volumes, Maruti Suzuki has extended its presence to 125,000 villages last fiscal, as compared to 93,400 villages it sold its products in a year ago.

R S Kalsi, executive director (marketing & sales), Maruti Suzuki India Limited, said, “First the delayed monsoon and now unseasonal rains have seriously impacted the agrarian output and rural economy. It is a national concern and impacts everyone. Maruti Suzuki has taken a slew of initiatives to reach out to rural customers in this hour of distress.” To help rural customers, the company has conducted over 1,000 complimentary mega service camps in February 2015 and 2,000 in March 2015.

With the extended distribution network, the company was able to grow its rural sales by 26 per cent to 366,000 units between April 2014 and February 2015. The stress in the rural economy, however, affected volumes in March when sales grew by only six per cent. The impact on demand in rural markets has raised concern as rural sales accounted for over 34 per cent of the Maruti Suzuki’s total volumes at the end of the last financial year.

Kalsi said, “While there is stress in short term, the long-term growth story of rural India is positive. When infrastructure jobs reach rural India, the dependency on agriculture is expected to come down. Incomes will, in turn, trigger growth in goods and services. Companies that put up right enablers in place will benefit.”

Hyundai, too, confirmed it has added 37 outlets over the last nine months to scale up presence in rural areas. “In Q4, agricultural economy saw low traction as untimely rains resulted in loss of yield with poor crop realisation, leaving low disposable income in the hands of consumers. In these adverse situations, Hyundai grew rural sales by 18 per cent as we have worked on extending our distribution and service network in rural areas,” said Rakesh Srivastava, senior vice-president (marketing & sales), Hyundai Motor India Limited.

Between January and March 2015, the company has increased the number of outlets in rural markets to 320 from 283 in the corresponding period last year. The company now has 664 rural sales and service executives as compared to 400 a year ago. The initiatives have helped Hyundai grow sales in rural markets by 18 per cent to 24,600 units in the first three months of 2015. Currently, rural sales contribute 21.3 per cent to Hyundai India’s overall tally.

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Tags: India
  1. T
    t p
    Apr 5, 2015 at 9:42 am
    "Falling bike and tractor s are the latest signs of rural distress" is not correct. The real reason of "Falling bike and tractor s" is mis-selling & exploitation of the villagers by the s agents by inflating the EMIs? price / Commission on these . The villagers unaware of the running cost & penalties if EMI not paid, fall prey to the smen & then repent.

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