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Three years of good crops, smart savings: why rural car buyers are smiling upon Maruti, Tata, M&M

Author: Shobha Mathur
Publication: The Economics Times
Date: May 19, 2022
URL:      https://economictimes.indiatimes.com/prime/transportation/three-years-of-good-crops-some-smart-savings-why-rural-buyers-are-smiling-upon-maruti-tata-mm/primearticleshow/91648231. cms?s=03&from=mdr

Having to pay higher for entry hatchbacks due to frequent price hikes and chip shortages, the consumer preference in rural India is tilting towards more premium models. But where is the money coming from? Three years of good monsoons, rising incomes, and some good savings due to judicious spending during the second wave of the pandemic.

Guess what India’s villages are buying these days? Cars — and in good numbers. Small, pocket-friendly, basic ones? Nah.

Maruti Suzuki will bear testimony to that. It has witnessed a shift in customer preference in the rural areas in the last three years.

For India’s largest carmaker, the share of rural sales through its Arena network of showrooms has risen from 43.4% in FY19 to 47.9% in FY22. Interestingly, during this period, its Nexa showrooms that retail premium models, have clocked a higher contribution from rural sales — almost doubling from 14.7% to 28.5%. While the majority of the Nexa sales still comes from the urban markets, the rural share has been steadily increasing, signalling a shift in consumer preference in the hinterland towards more premium vehicles.

RC Bhargava, chairman of Maruti Suzuki India, was well aware of this changing market dynamics. He did some crystal-gazing during the company’s annual results video conference last month. “Small cars used to be the bread and butter for us, but now no butter is left in the small-car market anymore. That’s the way it’s going to be, and that is something we have to live with. We have to adjust to the market conditions and do what we can to the best of our abilities in the circumstances in which we exist,” he said.

The pandemic, frequent price hikes (almost 40% in the last five years),and chip shortages have changed the complexion of the market. Having to pay a higher price for entry hatchbacks, which used to be originally the main draw in rural India, the consumer preference is now tilting in favour of premium hatchbacks and MPVs/SUVs (mid to top variants).

While the Alto800, S-Presso, Ertiga, XL-6, and the Eeco van continue to be the top sellers for Maruti, the share of hatchbacks in total sales has gone north from 57.5% in FY19 to 60.2% in FY22. This is primarily due to the rise in contribution from the mid- and premium-hatchback segments —think Swift, Celerio, Ignis, and WagonR. On the other hand, the entry hatches have experienced a slight dip from 22.1% to 21.3% during the same period.
Maruti Suzuki's rural sales- _segment-wise contribution @2x

So, where are the rural folks getting the money to buy higher-priced cars?

Changing gears

In the last three years, India has seen good monsoons and the kharif and rabi crops have been getting a higher minimum support price. A lot of road-infrastructure investments have also been made by the government. Over the years, rural incomes have risen, leading to a faster growth and recovery in the villages compared to urban pockets — especially after the second wave of the pandemic.

Confirming this change in market dynamics, Shashank Srivastava, senior executive director-sales and marketing at Maruti Suzuki, tells ETPrime that the rural contribution for Maruti has increased over the last three years from close to 40% to about 43.5% at present.

“That means that the rural growth is faster than the urban growth,” Srivastava says. He adds that the percentage of sales in the urban areas is actually down, while rural areas are up. While the penetration of entry hatches and vans is higher in the rural areas, the transition to premium models is now being increasingly seen.

In the last five years, the entry hatchback market has shrunk almost 32% pan-India while premium hatches have enjoyed 20%-23% of the market. The price elasticity for consumers in the latter segment is a little higher. “So, let's say a 5% increase in price in an SUV may not have so much effect, as the price sensitivity is different,” Srivastava says, explaining the shifting preference for premium models.
Rural sales growth for Maruti Suzuki India@2x

Ditto is the case for Tata Motors.

Its rural-market share has increased 3.5%-4% over the last year to 38% at present. Its popular models such as Tiago, Nexon, Safari, and Altroz are pushing the cart. Rajan Amba, vice-president - marketing, sales, and customer service at Tata Motors Passenger Vehicles Ltd, says the rural markets have been evolving due to the push by industry and the various product choices on offer. The rural buyers now demand more tech features.They have rising incomes from agricultural produce and have good savings due to lower purchases during the second wave of the pandemic.

A lot of consumers are keen to buy the top-end models, depending on whether they are landowners or farmers based on affordability and needs. Now their income has been channelized to buying a vehicle for mobility and personal security. Also, better distribution networks, repositioning, and bigger size of showrooms to house the full range of Tata models have increased the access to the buyer and worked in the company’s favour. The consumer has graduated from the entry variants to the mid and top variants of Tata Motors’ models.

For Mahindra & Mahindra, the rural share in total passenger-vehicles sales is around 47%.Models such as Bolero and Scorpio, along with XUV300 and XUV500 are rural market’s hot favourites.

Som Kapoor, partner - automotive at EY agrees that even the rural populace with large families have shown a preference for SUVs where a family of six can be accommodated easily. But he feels rather than new car sales, pre-owned cars have done very well because across segments they tend to percolate down after a five-year run from bigger cities to rural towns.

But the realities for two-wheelers are a bit different.

"The percentage of sales in the urban areas is actually down, while rural areas are up. While the penetration of entry hatches and vans is higher in the rural areas, the transition to premium models is now being increasingly seen."

— Shashank Srivastava, senior executive director, Maruti Suzuki India

The two-wheeler downshift

According to Kapoor, the cost consciousness present in the rural market has affected sales of two-wheelers.

Factors like frequent price hikes, rising raw material costs, new regulations related to mandatory third-party insurance, and safety and emission norms have proved to be key drags for two-wheelers.

Temporary closure of dealerships, rising commodity prices, and higher channel inventory restricted the volume growth of two-wheelers during the second wave of the pandemic. But now, the recovery is faster in rural markets compared to the urban centres as motorcycles are mostly sold in the former region. Scooters have taken a hit in urban markets due to closure of schools and colleges. Since most of the buyers of scooters are women professionals, the work-from-home culture has led to lower sales.

Though the commuter bikes segment has seen some sales dip in rural areas, it is still the dominant market. Recently, YS Guleria, director - sales and marketing at Honda Motorcycle & Scooter India (HMSI), said that with rising prices of two-wheelers, demand was moving to lower-displacement bikes. For instance, a prospective buyer for a 150cc-160cc bike settled for a 125cc vehicle and similarly a prospective 125cc bike consumer went for a 100cc-110cc bike. This was a major factor that made HMSI enter the 100cc low-end motorcycle segment this year to tap into the rural and semi-urban demand.

For Hero MotoCorp, almost half of its sales comes from the rural markets, with preference for personal mobility driving demand. But customers downshifting to a lower variant within the intended model is a key trend in two-wheelers.The factors determining purchase continue to be engine performance, price, mileage, maintenance, and downpayment/finance options.

The commuter segment constitutes around 40% of the total two-wheeler market. Vinkesh Gulati, president, Federation of Automobile Dealers Associations (FADA) feels that due to the distress of the second wave of the pandemic, despite a good crop for the last three seasons, the purchasing power has gone down for the rural buyer due to rising interest rates on vehicle loans and therefore the inability to repay EMIs.

“Earlier, when there was a good crop, the buyer used to invest in a good two-wheeler or a car,” says Gulati. He feels that the industry saw degrowth because the commuter segment is selling less. The 125cc-150cc has seen growth, but the production and supply chain issues related to chips have pulled down retail sales.

The bottom line

In rural markets, the trends in the two-wheeler and passenger-vehicle space are moving in opposite directions.

While commuter motorcycles are getting more attention in the rural markets, the demand for passenger vehicles is seeing an upward shift towards top-end variants and more SUVish-styled hatchbacks. MPVs, hardy SUVs, and vans have always been popular in this region due to their load-carrying capacity. Now their demand is rising further as they offer multiple smart features.

Srivastava from Maruti feels that for cars, the sensitivity to price increases, in terms of the running cost led by rising fuel prices, is a little lower compared to two- wheelers. This has led to a divergence in the performance of passenger vehicles and two-wheelers in the rural areas.

That brings us to a key question: Can rural markets take the Indian auto industry out of the choppy waters?

Gulati from FADA feels numbers are still not that bright. “Overall vehicle sales are down by 20%-25% in rural markets since the second wave of the pandemic compared to the pre-pandemic days”.

He points out that in rural areas lower-income customers have deferred vehicle purchases while buyers with larger budgets are moving to more premium vehicles. In the urban markets, the customer preference is for high-end vehicles in both two-wheelers and passenger vehicles.

No wonder Bhargava cautioned about the future of entry-level small cars in his recent address.

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Author: Alka Dhupkar
Publication: The Times of India
Date: May 2, 2022
URL:      https://timesofindia.indiatimes.com/india/loudspeaker-lessons-for-india-from-a-maharashtra-village/articleshow/91259002.cms

The villagers of Barad have passed a resolution to stop the use of loudspeakers

Barad shows that strong-arm tactics are not needed to curb noise pollution; a simple matter of sitting across a table and discussing can do wonders

Barad is a biggish village in Nanded district of Maharashtra with a population of around 15,000. It is roughly 20km from Nanded city. Over time, the village has prospered and places of worship, among other buildings, have been renovated.

The village has 15 religious places — 12 Hindu temples and a place of worship each for Buddhist, Jain and Muslim communities. In some neighbourhoods, these religious places are in close proximity. No problem there.

It was only when these places started using loudspeakers to broadcast sermons, aartis and bhajans that the problem started. It became a veritable Tower of Babel — all noise and confusion.

“Since five in the morning, we used to play songs. In some places, one couldn’t hear the other’s songs or for that matter what was played in our temple,” says Suresh Deshmukh, a trustee of the local Hanuman temple.

For days on end, farmer Sharad Kawle’s 80-year-old grandmother couldn’t get a peaceful night’s sleep because of the rampant use of loudspeakers in the village.

But all this is in the past now. In charged times like these, Barad stands out as a model of communal harmony. Back in 2018, the villagers unanimously decided to remove loudspeakers from all religious places.

So, what happened in 2018?

According to deputy sarpanch Balasaheb Shankarao Deshmukh, sometime in December 2017, a Ganesh temple was using loudspeakers to broadcast maha aarti and a Buddha vihar nearby was playing religious songs. This went on till late at night.

“Groups from both sides started raising voices against each other, asking that the volume be lowered. Harmony in the village was completely disturbed,” he says. “Somehow we managed to cool tempers, but the tension simmered.”

But this wasn’t the only incident. A local school kept complaining about noise pollution to the Shiva temple trust and others in their area. The students couldn’t concentrate on studies because there was a kind of competition in using loudspeakers till late night and early mornings among all the religions.

The villagers were fed up. Some of them met after the tension escalated between Buddha and Ganpati followers. During a meeting with the local police, they discussed the proposal of removing all loudspeakers.

Thereafter, the villagers held a meeting with all the religious groups separately. Everybody accepted that the use of loudspeakers was a cause for concern and social discord. The religious trusts said if it was mandatory for all religious groups then they would also stop using loudspeakers.

After the consultations, a special gram sabha was called and a unanimous resolution was passed.

The villagers agreed to use sound boxes instead of loudspeakers. The only caveat: the volume of the sound box should be maintained at a pre-mandated level so the sound does not go beyond the walls of the holy place.

The gram panchayat has already installed around 40 small sound boxes for local announcements such as deaths, vaccination or other government programmes.

After the noise, peace

Yogesh Ratnparakhi, who runs Om Sai Coaching Classes in Barad, says, “In my centre, there are around 100 students and I can’t tell you how happy we all are that the loudspeakers have finally stopped. Earlier, students would use unending noise as an excuse not to study. Now, they properly focus on studies.”

Kiran Mahajan, a trustee of Chandra Prabhu Digambar Jain temple, says, “Ours is a private temple that is open to the public. We too had installed a loudspeaker because others installed it too. But after the removal of loudspeakers, we didn’t lose any devotees. Loudspeakers actually don’t matter.”

Sharad Kawle, the farmer, says, “Many of us in this village are followers of the Varkari bhakti movement. I believe that your religious activity should not disturb others. Keep it personal, so we all supported this proposal.”

His views are echoed by Sardar Sattar Khan Pathan of Jama Masjid in Barad. “We respect festivals of all communities. The kind of communal harmony we have maintained would not have been possible with loudspeakers at each religious place in the village.”

According to Vasant Lalme, a trustee of the Shiva temple, loudspeakers are not essential for singing bhajans or kirtans. “Devotion is a very personal feeling. It can be attained without loudspeakers. We have proved it.”

Model village

Deputy sarpanch Deshmukh, however, is disappointed that his village has not been given due recognition for the innovative solution to the menace of unchecked loudspeakers. The village doesn’t encourage the use of loudspeakers even for political rallies, weddings or other celebrations.

In other ways, too, Barad can be touted as a model village. It has received state awards for cleanliness and drinking water distribution management, open defecation-free status, success of ‘tanta mukti’ yojana (a scheme to clear local disputes at the village level) and other achievements.

The village has 20 CCTV cameras, which have helped curb theft, sexual harassment and other crimes. The village has developed a proper watershed system; a dormitory near a rural hospital is a unique feature of the village. It has also built a hostel for girl students, it has a zilla parishad school, multiple anganwadis, among other facilities.

As the noise over the use of loudspeakers at religious places grows louder and various state governments are using strong-arm tactics, perhaps it is Barad’s use of consultation that stands out more than its other achievements.