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Amid slowdown, good monsoon is expected to drive auto sales

Amid downturn in automotive sales, the good monsoon rainfall in the country has made automakers optimist from rural markets and expecting a revival of sales

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In the middle of economic slowdown and downfall in auto sales, the monsoon, performing well since July in major parts of the country, has shown a silver lining for the automotive companies. In the first five months of FY20, Mahindra & Mahindra’s automotive sales declined to 195,168 from 220,702 units sold between April 2018 to August 2018. In the same corresponding period, car sales of the company downslided 46 percent, from 8,473 units to 4,603.          

However, according an Economic Times report, amid good rainfall in the monsoon season, auto companies are turning towards rural markets to revive sales. Maruti Suzuki, Hyundai Motor India, Mahindra & Mahindra, Toyota Kirloskar and others are working aggressively on expanding rural sales and service outlets.

According to the report, these auto manufacturing companies are also organising special programmes, events and roadshows in the rural areas, offering attractive financing schemes and exchange deals to draw in consumers, where good rains have raised hopes of a bumper harvest and faster recovery in the economy.

A good Kharif harvest is expected to boost the buying sentiments in the rural areas. It is expected to increase demand in the rural markets, beginning from the festive season. Shashank Srivastava, Executive Director - Marketing and Sales at Maruti Suzuki is quoted in the report, saying, “We have seen an uptick in enquiries, especially for petrol vehicles, which is the first sign of some revival in these markets.”  

Maruti Suzuki’s, rural sales dropped 16 per cent in the first four months of the fiscal year, but that was slower than the 25 per cent fall in overall volume. Rural markets contribute 38 per cent to Maruti Suzuki’s domestic sales.

In fact, the rural push doesn’t seem to be triggered just by the slowdown, as industry executives expect markets outside big cities to drive much of the sales in future.

It is “the market of the future”, ET quoted Renault India Managing Director Venkatram Mamillapalle in the report, “The young generation in cities is moving towards ride hailing rather than owning a car,” Mamillapalle further quoted.

He expects the first sign of good news to emanate from the rural markets. “After demonetisation, we have seen a downturn in the real estate sector and, slowly, it is coming back and it has started to revive in towns and not the big cities,” Mamillapalle said. “So, the first reflection of revival is in the rural markets.”

For automakers, rural demand has slowed down but it is still better than the big cities. And therefore, a good monsoon has made them optimist from rural markets with the Kharif harvest.

N Raja, Deputy Managing Director, at Toyota Kirloskar, is quoted in the report, as saying, “The fall in sales in non-metro areas was 6 per cent slower than that in metro areas in the four months from April 1. Buyers in non-metro areas outnumber those in the big cities for the newly launched Glanza hatchback.

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