Rural demand drives 12% sales increase in India image

The Indian auto market is expected to grow in 2016, as domestic carmakers are counting on customers from the rural areas to invest their newly-found wealth in SUVs and other types of vehicles.

According to a representative of the Society of Indian Automobile Manufacturers (SIAM), General Director Vishnu Mathur, the new financial year (April 2016 – March 2017) will bring a 12 percent growth in the sales of cars throughout India, on the rise compared to volumes sold until the end of the current financial year, which register an increase of “only” 8 percent. This growing trend is intimately related to the accession to wealth of buyers from India’s rural areas, whose purchases make up approximately 35 percent of vehicle sale volumes. The figure refers to everything from cars to SUVs and vans, with expectations for further increases as farmers’ incomes continue to rise. Even if deliveries in January show a small decline of 0.7 percent (168,303 units sold), SIAM officials called this a “temporary blip” and declared that the market will turn positive again.

The winners in India are automakers such as Maruti Suzuki India Ltd. and Mahindra & Mahindra Ltd., each with around 33 percent of their total sales coming from non-urban areas. Others, such as Hyundai Motor Co., are jumping on this opportunity by expanding their network of dealerships and dedicated stores in rural areas throughout the sub-continent. In a statement released late last week, SIAM’s General Director Vishnu Mathur talked about the direct link between appropriate weather and the expected boost in car sales: “Agricultural growth depends on the monsoon, and chances are that next monsoon will be better. With that there will be an improvement in the purchasing power and income levels.” More than 50 percent of Indian farmers and their crops are heavily dependent on the June to September monsoon season and good rains will create wealth which will translate into direct investment in vehicles, which is exactly what automakers hope for.

Via Bloomberg