With Urban India choking rural markets will be the next growth engine for carmakers

Congestion on the metros and urban cities have slowed down the growth of cars but the stronghold of rural India with favouring factors have seen India becoming the 4th largest car market in the world.

By: | Published: August 31, 2018 1:31 PM

The increasing traffic woes and alarming pollution levels in the urban Indian cities have slowed down the growth in car sales in major Indian cities including Delhi, Mumbai, Bengaluru and Chennai. India recently overtook Germany to become the 4th largest carmaker in the world, while this is the best time to do car business in India, lack of road infrastructure, unplanned city roads and improper maintained of roads and highways has led to driving in the city a difficult and time-consuming task.

Carmakers in India have already sold over 8.73 lakh cars in India this financial year and the car market in India is booming at a growth of about 18%. However, the contribution to this massive growth has come from Tier-2, Tier-3 cities and less from metro cities. Experts believe that there huge untapped market of rural millennials that's on the rise which has contributed to increased car sales. Indian rural economy is on the rise and above average monsoon has boosted buying sentiments in upcoming cities. The government has also increased the minimum selling price of crops to boost the rural economy.

In Urban and Tier-1 cities, with the rise in the number of OLA, Uber and other cab-aggregator cabs, there have been more sales of cars like Maruti Suzuki Dzire, Hyundai Xcent Prime and Maruti Suzuki Wagon R. The registration under commercial taxis (Yellow board) in cities have gone up by as much as 15% in Delhi, about 12% in Mumbai and 18% in Chennai as per the Regional Transport Office (RTO) data. While the number of registrations of private cars has not declined, the growth has certainly slowed down in big cities. Delaying buying decisions due to many reasons including increased traffic, better metro connectivity, increased interest rates and more importantly parking troubles across top-cities.

Mercedes-Benz India's new showroom in CoimbatoreMercedes-Benz India's new showroom in Coimbatore

In the past, we have seen measures by National Green Tribunal to ban the sale of high-end diesel cars and SUVs with more than 2L engine in Delhi/NCR to combat pollution and last three winters, Delhi government has introduced the Odd-Even Formula to ensure less smog. As India gets ready for future of mobility and electric vehicle, city planning will play a crucial role and the scope of developments in upcoming urban areas much more and will be comparatively easier than the choked metro cities of India.

Every carmaker is currently investing to venture into roots of India to make the most of the growth. Luxury carmakers including Mercedes-Benz, BMW, Jaguar Land Rover too have realised and opened dealerships in Tier-2 cities and going forward expect most of the car sales coming from semi-urban and rural areas.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.