Maruti Suzuki bets on rural market to drive sales

Maruti Suzuki, India's largest carmaker, is on an overdrive in the rural hinterland where it sells one of every three cars sold. It expects the rural market to contribute about half of its sales by 2015-16.

To beat market blues during a slowdown in sales, Maruti has opened 23 new retail outlets in towns and hamlets in the last three months. 

Maruti's share of rural sales has witnessed a continuous jump and last month it got a big boost with 55% growth in sales, taking its overall share to an all-time high of 33% from just 3% in 2007-08. In a slowing Indian market where sales have hit bumps led by higher fuel prices and expensive finance, rural market has become a key for Maruti Suzuki's success. 

"Now, we have a reasonable base of rural sales and the 55% jump epitomises the strength of the Indian hinterland markets and villages. We are developing new markets and generating customers who have never used cars in these smaller towns (and expecting them) to generate long-term competitive advantage," says Maruti managing executive office (marketing & sales) Mayank Pareek. 

Maruti identifies human settlement of around 10,000 as rural markets and has sold more than 23,000 cars in such markets in June this year. Maruti rural marketing initiative started in 2007, when it identified many small clusters to sell cars and roped in panchayat functionaries to generate potential customers. 

Now, many of these small clusters - turmeric farmers in Tiruchengode in Tamil Nadu, apple growers in Himachal Pradesh - are generating constant sales. According to company data, many of these customer groups account for 35-50 vehicle sales a month that double during the harvest season. 

Rural markets have been playing strong role in sustaining growth of carmakers and even giving a bigger chunk of sales for small-ticket buys like bikes and scooters. Hero MotoCorp's 46% sales are coming from rural market and the share has been consistently rising. Higher farm incomes and sustained economic growth have led to an increased consumption in such areas. 

Maruti, which constantly profiles all kind of customers, says that rapid improvement in rural market, thanks to the exposure to television and other media, even its high-ticket cars are much in demand. For instance, premium cars like Swift, Dzire and SX4 have got almost equal share of sales from the smaller towns like their urban markets.