With economy slowdown brutally hitting urban pockets, auto firms have started reaping benefits from rural segment by joining hands with public sector banks (PSBs) that have wider network in rural belt. The firms are also announcing rural India-focused vehicle sales schemes.
Talking to FE, Vaishali Jajoo, an auto analyst attached to a Mumbai-based broking firm Angel Broking, said the recession has not hit rural India where agriculture provides perennial income for farmers. Auto sales have dipped in urban region due to salary and job cuts in recent months while it started picking up in rural belt. Auto sales would further surge in rural areas in the future as the vehicle manufacturers have started tying up with more PSBs to have wider reach in rural villages, she added.
The auto sector started witnessing slowdown since last October due to global economic turmoil. With private bankers tightening auto loans due to global meltdown, the auto firms have started depending on public sector banks, which, in turn, well utilised the opportunity to attract sizeable chunk of auto business from private financial institutions.
Syndicate Bank, which used to offer auto loans for around 300-400 vehicles per month before October, has now increased its auto finance to around 600 vehicles per month, said BR Pai, general manager for retail banking, Syndicate Bank.
The bank that tied up with Hyundai in February is in discussion with auto heavy weights like Maruti Suzuki, Tata Motors, Mahindra & Mahindra and Ford for auto loan arrangements, Pai added. In addition to new rural customers, the bank has an advantage of canvassing for auto loans among its existing customers those who have proven track record. He said the bank has more than 60% of its 1.5 crore customers in rural and semi-urban belt.
Like private sector banks or even faster than them, he said Syndicate Bank is processing auto loan applications within 48 hours. He also said the bank has planned to double auto lending portfolio, which is currently at Rs 1,000 crore, within the retail banking business.
Endorsing the rural support to auto sector, P Balendran, vice-president of General Motors India (GM) said the company?s 60% of sales have started coming from non-metros like Ahmedabad, Jaipur, Pune and Lucknow and other small and mini towns including Tier II and Tier III destinations. Earlier around 85% of GM vehicles were sold on auto finance of which 70% of vehicles were financed by private bankers while only 15% vehicles financed by PSBs, he said. Now trend is the other way around. Currently, Balendran said around 70% of GM vehicles have been financed of which loans for 55% of vehicles comes from PSBs while loans from private financial institutions declined to15% of vehicles.
The company that tied up with Bank of Baroda and Andhra Bank is planning to sign pact with some other PSBs to cover rural villages. In addition, the company has decided to increase its dealerships to 250 in 2009 from the current 195 dealerships while increasing its number of service outlets to 250 from the current 190 across the country. Most of the new dealerships and service centres would cover semi-urban and rural segment, he added.
Maruti Suzuki, which owns more than 50% of market share in the Indian auto segment, is further ahead in grabbing rural business. According to Maruti?s spokesperson, the company has rolled out an unique ?Panchayat Scheme? to cover rural areas nationwide. The company has appointed Rural Dealer Sales Executive (RDSE) for the semi-urban and rural areas. They are from the local community. Currently the company has more than 3,000 RDSEs in its sales network across the country. ?We have also expanded the network itself into these areas in the form of extension counters (where full fledged dealership is not viable option) and their strength stands at over 185 extension counters,? he added.
In addition, he said the company regularly organises various events like Gramin Mahatsov, mandi events for farmers and loan melas in rural pockets. The company has also recently tied up with ITC?s agri-business division e-Choupal for marketing its cars in rural areas, he added.
As a result, he said, the company sold around 53,000 units of cars under ?Panchayat Scheme? during the first 10 months of the this financial year, he added. Maruti, which already has tie-up with State Bank of India and its six associate banks since last six years, has also tied up with PSBs like Andhra Bank, Bank of Baroda, Bank of Maharashtra, Union Bank and Oriental Bank of Commerce in recent months to have wider reach in rural areas.
•With private banks tightening auto loans due to slump, the auto firms have started depending on public sector banks
• The syndicate bank, which has tied up with Hyundai, is processing auto loan applications within 48 hrs
• GM motors, which has tied with Bank of Baroda and Andhra Bank,has decided to increase its dealerships to 250 in 2009 from current 195
• 70% of GM vehicles have been financed of which loans for 55% comes from PSBs
