Maruti sales grew faster in rural markets than in urban centres last fiscal

Rural markets accounted for 43.6% of the carmaker’s overall sales in 2021-22 compared with 40.9% in the previous year. The company sold more than half a million units in non-urban areas, driven by demand for hatchbacks Alto, Swift and WagonR.

Shashank Srivastava, senior executive director (marketing and sales) at Maruti Suzuki said rural markets have outperformed for the company every year, barring 2013, and ever since the company started monitoring rural sales separately in 2007.

“The reason is with rural incomes rising, motorisation is spreading to rural areas. If you see the last 3-4 years, the monsoon has been good. Last year we saw record kharif crop; rabi sowing also has been very good,” said Srivastava. “Reservoirs are much above the average capacity. So I think things are okay.”

Of the 1,331,558 Maruti Suzuki vehicles sold across the country, 591,800 were in the rural markets where Alto, Swift, WagonR, DZire and Eeco were the best-selling models.

The increase in car sales in rural areas comes at a time when demand for motorcycles in the local market has been on a decline due to a rise in acquisition cost after the transition to BSVI emission standard and the economic impact of the pandemic.

“The target customer for two-wheeler and car buyers are different. The two-wheeler buyer is also comparatively more sensitive to running costs,” said Srivastava.

Overall, while demand for passenger vehicles remains strong in the local market, the automobile industry is facing headwinds due to the global shortage of semi-conductors, high commodity prices, and most recently the disruption in supply chain due to the Russian invasion of Ukraine and Covid-19 curbs in China.

Maruti Suzuki has particularly faced disruptions in production operations due to chip shortage. The company’s share in local sales fell to 43.4% last fiscal from 47.7% in 2020-21.

Srivastava said while the supply of semi-conductors has improved, there would be some disruption in production in the ongoing quarter too. The company is sitting on an order book of 345,000 units–its highest ever–owing to high demand and supply-side issues.

Srivastava said the company will continue to strengthen its portfolio, both in hatchbacks and utility vehicles, to regain 50% share in the local market. The company plans to launch multiple SUVs in India while focusing on new technologies like hybrid powertrains to enhance fuel efficiency, and take on rivals in the space.

“It’s a war cry in our organisation… what we call constructive paranoia…which means you cannot rest easy… It doesn’t take much time for the market dynamics to change, so we are always on our toes as how to improve efficiency, products etc.,” he said.

Srivastava said that hybrid technology, which features both internal combustion engine and battery, could be a good bridge to transition to pure battery electric vehicles (EVs) in the Indian market which currently does not have adequate charging infrastructure.

Srivastava said that while there is consensus in the industry that EVs will become mainstream, there is no consensus when it is going to happen.

“Analysts are saying that by 2030, 10-12% of the sales will be EVs… You can’t wait for it to become 100% to take care of the environment. So what happens? Of course, one solution is to make engines more efficient and the other thing is to have hybrid, which is cheaper to acquire than EVs. That could well be the road to electric,” he said.

Additionally, focus on hybrid technology could also help in reducing the cost of local production of several EV components.

“If you want to bring down the cost of EVs in India, you need to have localisation. There is some similarity in the components used in the strong hybrids as well as EVs,” Srivastava said. “So if you have a larger volume, localisation can improve.”

Maruti Suzuki is expected to launch its first electric car by 2025.