Despite difficult economic environment, Bharat will boost sales of Maruti

Automotive market leader Maruti Suzuki India expects volume recovery seen in recent months to continue thanks to strong growth momentum in rural India and growing preference for personal transport in markets urban.

“Good seedlings of kharif crops (up 8% year-on-year), better minimum support prices and fewer cases of Covid-19 (in villages) will help rural growth continue,” Shashank Srivastava said , Executive Director (Sales and Marketing), Maruti Suzuki India.

The contribution of rural to Maruti’s sales mix grew to 41% in the five months of 2020-21, up from 37% in the same period last year. In FY20 as a whole, rural sales contributed 39 percent of total sales. Even though growth has slowed in urban India, strong sales in rural markets are mainly a reflection of improving income levels, he said.

Maruti, like most automakers, defines rural based on the Indian government census. According to the 2011 census, there were 640,867 villages in India.

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The company’s sales to urban areas of India in August recorded an annual growth rate of 11%, while rural sales grew at a steady pace of 34.5%. Urban and rural sales declined 42% and 31% respectively over the cumulative period.

In addition to an increase in government spending, cash flow from a record harvest of rabi crops, good planting of kharif crops and a favorable monsoon as expected have inflated consumption in rural India. Earlier this month, the ICRA rating agency revised its forecast for sales of domestic tractors – an indicator of the state of the rural economy. It is 7 to 9% against 2 to 4% previously.

A sharp drop in inventory levels at channel partners – 80,000 at the end of August compared to 130,000 in April – also gives Maruti enough margin to ship more to its resellers and record higher sales, Srivastava said. Automakers count shipments to dealerships as sales.

Since the lifting of the national lockdown induced by Covid, the company has experienced a recovery. In August, its sales increased by 20% to 116,704 units. The gains, however, came largely on a weak base from last year, when it sold 97,061 units. “You can’t read much about last month’s sales because they were very low,” Srivastava said. YTD, the industry is still down 50 percent y-0-y.

However, it remains unfazed by the competition from Korean automakers Hyundai and Kia Motors in the SUV segment, where Brezza currently occupies a leading position. A 1.5-liter gasoline engine, which powers the Brezza, will hold the company in good stead and help the company fend off competition from the upcoming Sonnet compact SUV and other rivals.

“It’s a white space that will continue to draw,” he said, noting that the share of gasoline in compact SUVs now stands at 75%.

An analyst from a national brokerage said: “Once the market recovers, companies will speed up their launches and Maruti will have more competition.”

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