Rural markets come back to life, automakers see significant pick-up in demand

A strong pickup in the sales of two-wheelers, small cars and tractors in recent months suggests improving consumer sentiment in rural India, a key market for these products where demand has been subdued due to the economic impact of the pandemic. Retail sales of two-wheelers in India rose in strong double digits in the last two months, and demand in rural markets is seen as a strong contributor to the growth. For tractors, the numbers in November entered the positive territory for the first time after the first quarter in the current financial year.

At Maruti Suzuki, dispatches of the Alto small car - a top seller in rural India - rose 42.5% to 61,767 units in the three months through November.

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The launch of the Alto K10 in August this year has played a part in the growth in sales, but Shashank Srivastava, senior executive director (marketing and sales) at Maruti Suzuki, said trends were suggesting improving demand in rural markets. "We did see some slowdown in sales last month, but rural demand is seasonal. Monsoons have been good the last 3-4 years, reservoir levels are healthy, rabi sowing is brisk. We expect rural spends to gain pace after the harvest next month," Srivastava told ET. The proportion of rural sales for the company has increased marginally to 43.8% this fiscal year from 43.3% last year.

In two-wheelers, after modest single-digit growth in retail sales on a low base last quarter, things are getting better. Data available with the Federation of Automobile Dealers Association (FADA) show volumes rose 41% in October and 24% in November.

Hero MotoCorp, India's largest manufacturer of two-wheelers, has predicted sales momentum in segment to build up in coming quarters on account of favourable economic indicators, including encouraging farm activity and positive consumer sentiment during marriage season.

In the farm equipment sector, Hemant Sikka, president at market leader Mahindra & Mahindra, said procurement of kharif crop was progressing well, bringing liquidity in the hands of farmers. This augurs "very well for the tractors' industry's growth," he said. Retail sales of tractors rose 56.81% in November, after declining for four straight months, as per the FADA.