Indian automakers see increased sales in rural areas, fuelled by higher farm incomes

MUMBAI: Automakers in India are on a marathon upcountry drive with a mission - to promote "inclusive growth" in car ownership.And the effects are showing. The so-called Bimaru belt- of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh - is leading Motown's sales growth charts, upending conventional wisdom that prioritises urban pockets.So, what's behind this new-found love for country roads? The second consecutive good monsoons have boosted rural incomes. And the automakers are doing their bit - an expanding service network that's underpinned by an attractive financing infrastructure.Hence, low per capita states saw sales rise 27% in the second quarter, 10 percentage points more than the 17% growth for the industry. Bimaru states have clocked growth in excess of 25%, while the west zone expanded by 19%. The East saw 16% growth, while the south reported the slowest pace of expansion - at 7%.What's more, the Bimaru states with significant rural populations cumulatively contributed 20% to the total volumes in the September quarter.A regional manager at a leading automaker overseeing the operations of Uttar Pradesh and Bihar said that higher farm output contributed significantly to the income growth in tier two cities, with SUVs leading the sales drive. "The retail momentum could have been better than actual if the supplies were not hurt due to localized lockdown at the vendor or plant levels," said the executive.Rural demand has outpaced that of major cities due to higher sowing area of Kharif crop and better yields.The total kharif crop sowing area this year increased 5.7% to a record 1,113.63 lakh hectares.In addition, the government has increased the procurement of paddy to 42.5 lakh metric tonnes, 35% higher than the year ago.Also, the number of procurement centres for Rabi & Kharif seasons combined rose to 64,515 in FY20 from 48,550 in FY17. Lastly, the monsoonal rainfall was 9% higher than the 50-year, long-period average and it was the third highest cumulative rainfall in 25 years. 79438176Going soloAn increasing preference for personal mobility has also created demand for entry-level cars, helping the market leader Maruti Suzuki.Consequently, the share of those states with higher contribution from farmland incomes performed better than those with more urban districts. Maruti Suzuki, India’s largest car maker, saw its rural share in the total volumes rise to 41%, about 200-300 basis points higher than the average of the last few years. Similarly, the share of the top 10 cities dropped to 32% in the second quarter, a decline of around 200 basis points.Tata Motors and Mahindra have seen their rural shares rise 400-500 basis points to 43% and 53%, respectively, in the last one year.Shailesh Chandra, president , passenger vehicle business unit at Tata Motors told ET that despite the slow start this FY, the rural market had bounced back in Q2 with growth of 58%.M&M strengthened its reach with smart zip stores and its coverage has expanded to 71% of the country's talukas. The company even leveraged its farm division to reach out to new buyers in some of the northern states to get incremental sales. Meanwhile, Toyota Kirloskar is expanding its network into the hinterland and has added 50 new small locations to its network.Naveen Soni, Sr. VP, Sales & Service, Toyota Kirloskar, told ET that as the rural areas are relatively less affected by the lockdown, many people from the cities are migrating to their hometowns and other rural areas.“As a result of such ‘reverse migration’, we are witnessing a lot of potential for higher growth in smaller markets when compared to big metros or cities. With ‘reverse migration’ being an ongoing phenomenon at the moment, we foresee growth in such smaller towns to be sustainable,” added Soni.Urban dominated states such as Tamil Nadu and Kerala have witnessed volume contraction for passenger cars, while Maharashtra, the largest state by volume, had logged growth of just 9%. Gujarat and Karnataka were outliers in the urban focused states and registered growth of 21-22%.The two-wheeler industry tells a similar story. Volumes expanded 10-27% in UP, Bihar, MP and West Bengal in the September quarter, but the broader industry growth was lukewarm.Telangana and Andhra Pradesh had strong growth in two-wheelers - of 36% and 10%, respectively. By contrast, Gujarat, Punjab and Rajasthan witnessed demand contraction in the range of 17-30%.

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