Maruti Suzuki sees uptick in small car sales on strong rural demand

After a prolonged sluggishness in the sales of entry-level, India’s largest car maker Maruti Suzuki India Ltd has seen growth in the sales of small, or entry-level, cars during October. This reflects strong consumer sentiments in the rural part of the country, while there is weakness in the urban market.

"In the first quarter, we saw a decline. But we were able to arrest the decline in the second quarter with sales remaining the same. We saw good traction in October with a growth of almost 10%," Senior Executive Officer for Marketing and Sales Partho Banerjee told reporters on Monday.

India's small and affordable car market has been declining since the pandemic, with entry-level hatchbacks losing their market share steadily. SUVs are now driving the overall passenger vehicles industry sales, accounting for around 50% of the industry volumes.

Affordability is the biggest factor that is impacting the sales of small cars. The rural market accounts for a significant share of small car sales, and the market is now gradually recovering.

"Rural did pretty well in October. We had strong a growth of 31% in the rural market last month while between April to October, we had a growth of 12%. This reflects better rainfall, good harvest, yield and minimum support price," Banerjee said.

Maruti Suzuki recently spoke about stress in the urban market. The recent monthly economic survey by the finance ministry has also highlighted a slowdown in overall urban demand, while rural consumption is witnessing some revival.

Banerjee had said that the automaker witnessed the rural market grow by around 8% during the first half of the financial year, while the urban market declined by 2%.

The weakness in the urban market can be attributed to factors such as the impact of several state elections and high monsoon in certain areas. Heatwaves in the earlier part of the financial year, and heavy monsoon in some parts of the company have impacted the traffic across dealerships, particularly in urban areas.

The recent data from the Federation of Automobile Dealers Associations (FADA) also reveals interesting shifts in the urban-rural dynamics of India's auto retail market. In October, auto sales in urban areas were down 2.7% month on month and 1.5% year on year. In contrast, rural sales were up 2.5% on the month and 1.4% on the year in October 2024.

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