Rural markets main plank of growth for auto industry: Maruti Suzuki

fe Bureau Posted online: Wednesday, Dec 25, 2013 at 0000 hrs
New Delhi : With over 18% growth this year, car market leader Maruti Suzuki said on Tuesday that the rural market has turned out to be the saviour for the auto industry at a time when sales in urban and semi-urban regions are facing stress from slowing economic growth, high fuel prices and rising interest rates.

Between April and November this year, Maruti sold about 2 lakh, or 30%, of its total volume in rural markets, as compared to 26% last year.

The company, which covered about 49,000 villages till last year, has already covered 60,000 this year and hopes to touch one lakh by March.

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“This shows the changing economy of India. The rural markets are our main plank of growth,” said Maruti Suzuki India chairman RC Bhargava.

At present, MSI has a total of 700 rural outlets, which are accompanied by workshops that are authorised to carry out repairs under warranty. In addition, it has 650 mobile vans that has helped in servicing even at the customers’ home.

Added Maruti Suzuki India COO (marketing and sales) Mayank Pareek, “A lot of myths have been broken. Originally we thought only entry-level cars will sell in rural markets, but that’s not true. Though the Alto and Wagon R are the highest volumes, the Ertiga, Swift and Dzire are also doing well.”

The company also said that the share of diesel cars in overall industry sales has declined this year to 54%, from 58% last year (peak was 62%).

“The worry is that the first-time buyers have really dropped from 70% to 64%. This is a result of lower growth in new job offers,” Pareek said.

Maruti, however, has put its proposed mega-facility in Gujarat in “cold storage” because of slowing overall demand — the country’s passenger vehicle market has dipped 5% to 16.41 lakh units in April-November FY14. “Capacity creation has to be linked to capacity to sell the products and there is no market today. We have land, but it is foolish to put capacity and keep it idle,” Bhargava said.

When completed at an investment of over R20,000 crore (with suppliers) around six plants in Gujarat will have the capacity to manufacture over 1.5 million units, and will likely be higher than the company’s current output across six plants in Haryana.

Maruti is currently offering average discounts of R17,000 across its range. Buyers of the Maruti Swift diesel can expect R15,000 off, while those looking for the Estilo can get as much as R60,000 off on the price.