INDIA GROWTH STORY: GROWTH FACTOR Maruti, Hero Honda ride rural sales to double-digit growth

Monday, June 1, 2009

GROWTH FACTOR Maruti, Hero Honda ride rural sales to double-digit growth

Initiatives In Small Towns Pay Off; Hyundai, GM And M&M See Dip In Growth In May

GALLOPING sales in rural India allowed largest car maker Maruti Suzuki and largest two wheeler maker Hero Honda to record high double-digit growth year-on-year in May, while other players coped with tough market conditions. Sales by Maruti Suzuki India (MSI) increased 10% to 70,785 cars and Hero Honda's sales jumped 23% to 3.82 lakh units in May 2009 on the back of increased demand from rural India. Both market leaders have started initiatives for this market to boost sales.
    "Our share of rural sales has reached double digits. It has gone up to 10% of the total sales from 3.5% two years ago. This market is buoyant, and now, even urban markets are showing increased demand and higher off-take in sales," MSI executive officer (sales and marketing) Mayank Pareek said.
    Hero Honda also plans to increase its activities in small markets. "Going forward, we will continue our effort to reach out to customers spread across the semiurban and upcountry markets," Hero Honda senior vice- president (marketing & sales) Anil Dua, said. The company would increase its network to 4,000 shops by 2009 end from existing 3,500.
    But, other car makers saw subdued sales in May. Sales by Korean car maker Hyundai dropped 4% to 23,503 units, though higher exports in May pushed up cumulative growth to 8.36% to 43,628 units. Tata Motors' sales dropped 22% to 15,388 vehicles. General Motors, which declared bankruptcy for its North American and Canadian operations on Monday and operates through a whollyowned subsidiary in India, reported a 7% drop in sales to 5,109 cars in May.
    Utility vehicle maker Mahindra & Mahindra sales fell 14% to 13,047 units in May with Logan sedan sales dropping almost half to 427 cars in May compared with 977 cars sold in the same month last year.
    Analysts tracking the auto industry said companies with large exposure to semi-urban and rural markets have benefited with high sales on the back of robust agricultural produce this year. "Entry into this new market is propelling high growth for big players with regular growth in sales. Even niche-players, like BMW, are entering smaller cities and markets to generate incremental sales. With a normal monsoon expected this year, we are looking at robust performance by some companies," said an auto analyst with Morgan Stanley.
    Honda Siel Cars improved its sales tally marginally by 3.3% to 4,073 in May even as it gears up to launch its new hatchback Jazz in the next few days. Honda's VP (marketing) Jnaneswar Sen said: "We are expecting sales to pick up in next coming months." Two wheeler companies posted positive sales. TVS Motors increased its sales by 5% to 118,574 units in May over the same month last year while Yamaha Motor's sales jumped 82% to 16,952 units during the same period.