Demand from semi-urban India fires up Auto Sector’s engines

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Strong demand from Bihar, West Bengal, Jharkhand, Madhya Pradesh, Haryana and Himachal Pradesh is bolstering the recovery for India’s leading carmakers battling shrinking sales after the Covid-19 induced lockdown.

The country’s largest car maker Maruti Suzuki, for one, registered 15-20% jump in retail sales in Bihar, Jharkhand and Himachal Pradesh in June. Sales also went up in West Bengal, Uttarakhand, Tripura, Meghalaya and Arunachal Pradesh. Interestingly, the increase in sales in these states has come at a time when the overall market for passenger vehicles tanked 25% to 1.7 lakh units last month.

Higher demand for personal mobility coupled with better income levels in agrarian belts after a record rabi harvest pushed up demand in these places, said Maruti Suzuki.

“With both wholesale and retail volumes dropping last month, there was an assumption that all states were in decline. But what we have seen is that there are some states which have grown over last year. It looks like that rural areas are doing better than urban centres, eastern India is performing better (than other regions)”, Shashank Srivastava, executive director (marketing and sales) at Maruti Suzuki, told ET.

Srivastava cautioned, though, that these early trends have emerged from data collated over two months since restarting operations and the business environment continues to remain volatile. The localised lockdowns being announced by local administrations may impact demand adversely going ahead.

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More immediately, the lower incidence of coronavirus outbreak beyond major metropolitan regions has helped spur demand in semi-urban and rural areas. “The impact of the coronavirus outbreak is more in urban clusters than in smaller cities. Rabi harvest, crop offtake and kharif sowing has been good. These factors have helped better sentiments in these places”, said Srivastava. Share of rural sales in Maruti Suzuki’s overall volumes have increased to 40% post-Covid from 38% in FY20.

With dealerships reopening across the country, Korean rival Hyundai too has seen a surge in bookings. In July, fresh bookings in high volume states such as Madhya Pradesh and Delhi increased by 71% and 33% respectively. In Maharashtra, Gujarat, Haryana bookings went up by 41%, 23% and 18% in the same period. Given the traction, Hyundai expects demand to inch up to 90% of pre-Covid levels by the end of the month.

“With the unlocking of nationwide lockdown, we have been receiving good customer response from various regions. With cautious optimism, we are evaluating the situation on regular basis and taking measured steps to maintain sustained recovery and positive momentum”, said Tarun Garg, director (sales and marketing), HMIL.

In states where lockdowns have eased over the past few weeks, a slew of measures by auto companies to offer attractive financing options has helped draw in hesitant buyers.

Naveen Soni, senior vice-president (sales and service) at Toyota Kirloskar Motor (TKM) said, “States in some regions (for example most states in Southern India & North East parts of India) are under complete lockdown and that has sprung some unexpected lows in those regions… (however) despite the overall increase in lockdown cities some (other) regions are doing better than what we had expected. This has been possible due to the various innovative finance and buyback offers that we have been able to churn out to help our customers make their purchase.”

This story is part of a series of articles in association with Facebook. Facebook has no editorial role in this story.

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