Maruti looks to farm rural bonanza

India’s rural and Tier 2 and 3 markets are expected to play an integral role in helping beef up the sales tally of Maruti Suzuki India, the country’s largest carmaker which, like all other players, is going through a lean patch.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 08 Oct 2013 Views icon3637 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Maruti looks to farm rural bonanza
India’s rural and Tier 2 and 3 markets are expected to play an integral role in helping beef up the sales tally of Maruti Suzuki India, the country’s largest carmaker which, like all other players, is going through a lean patch.

The company’s rural reach has been steadily on the increase from 2009-10 when it clocked 16.5 percent of domestic sales to 28 percent in 2012-13 despite the sluggish automotive industry. For the period April-August 2013, as per SIAM data, Maruti cars sold in rural India accounted for 118,952 units or 30 percent of the company's cumulative domestic sales during this period.

The company recorded a growth of 3.15 percent in the domestic market when the industry sales fell 5-6 percent, according to SIAM vehicle sales statistics. A bountiful monsoon in semi-urban towns is expected to set off a ripple effect through rural India and help check fuel prices as well as overall inflation and bring some cheer to an industry now in the doldrums.

Speaking to Autocar Professional, MayankPareek, chief executive officer (marketing and sales), Maruti Suzuki India, said his company’s strategy is to penetrate the smaller towns and expand in Tier 2 and 3 cities. The rural markets are growing at 21 percent. A good bumper crop, thanks to the good monsoons, is expected to increase the purchasing power of the buyer and draw rural customers to showrooms.

The local strategy

As part of its marketing strategy to woo regional customers, rural sales executives (RSEs) drawn from the local areas have been appointed in every taluka to talk to the customers in the local language.This is one part of the strategy to generate demand. These executives educate the rural buyer about the workings of EMI-based (equated monthly instalment) schemes and how purchasing a Maruti product is value for money. “Our dealers have started appointing RSEs in villages from among the local populace. The idea is to strengthen customer engagements and convert them to buyers,” explains Pareek.

The carmaker has also tied up with financial institutions and nationalised banks to extend buyer-friendly loan schemes to prospective buyers. At present, of the total 1,300-odd outlets that Maruti has about 700 are based in the rural areas. About 100 dealerships will be added this year in this market. Pareek says that demand in the rural markets and smaller towns is similar to that prevailing in urban cities and the demand for car models is also not very different barring the BS III and IV emission requirements.

Banking on exports to non-EU markets

The second plank of Maruti’s growth strategy is the export market. With the rupee continuing to be weak, exports are perceived as another growth driver particularly after Maruti changed its strategy about three years ago. “Earlier, 70 percent was exported to Europe but considering the fall in these markets, we have nurtured several new markets. Now the export basket is completely reversed with 70 percent of sales coming from non-European markets,” he says. New markets added to the export basket include Bolivia, Israel, Latin America and Chile with the A-star hatchback being a dominant model. Meanwhile, Maruti has announced an increase in its prices from October 1 as a result of rising input and production costs.

The price rise across models will be of upto Rs 10,000. The festive season normally sees an uptick of 10-15 percent. “At the beginning of the year, the industry predicted a growth of 5-8 percent that will not happen. It will depend on the festive season, if the festival is good then it will end with growth, otherwise it will be a dismal year,” sums up Pareek.

Since the beginning of the year, Maruti has launched several special editions to woo the buyer including ones on the Swift, Wagon R and Ertiga. A month ago, it launched the Stingray version of the WagonR which, it claims, has been well received but not sent the cash registers ringing in terms of bookings. The Stingray is readily available at showrooms due to low traction at dealerships.

Overall, Maruti is taking the cautious approach both to the oncoming festival season and financial year sales. The target is to hold onto last year’s numbers because of the ‘current not-so-good situation globally’ and the severe rupee depreciation. Petrol price increases of upto 50 percent over the last two years have deterred entry level buyers. This is best illustrated by the fact that Alto sales now average about 17,000 units a month, down from 25,000-odd units every month a year ago.

On other fronts, there have reportedly been some rumblings at the site of the company’s proposed Gujarat plant and the likely threat of land acquisition problems. However, Pareek brushes aside the suggestion saying the company has acquired all the land it requires. “But building the new plant at Gujarat makes sense only when the existing capacity of 1.7 million units in the Delhi-NCR is saturated otherwise it will mean idle capacity in Gujarat.”

Maruti chairman R C Bhargava concludes, “One has to go by the current market condition. Even if you have made a sales projection 2-3 years ago, now conditions have changed, so everything has to change accordingly, I don’t know how the economy will change and how the market will grow in the future. We have to wait and watch. Not only Maruti but all carmakers have been impacted and there has been no increase in demand at all; we are not the only ones.”
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