Tuesday, May 26th

LATEST:
You are here: Business Business Global automakers scour India's backroads in search of dream market

Best_of_2015_587x57_Results

Global automakers scour India's backroads in search of dream market

indiaMUMBAI--For global automakers, the dusty backroads of rural India could be the new El Dorado.

As economic torpor suffocates demand for new cars in India's megacities, incomes are growing faster in small towns and country areas. That's pushing the likes of General Motors and Honda Motor Co to fan out in search of buyers in places where fewer than 20 people in every thousand own a car - for now.

Standing firmly in the way are strong home-grown brands. With local services plentiful and repairs cheap, Maruti Suzuki India Ltd, Mahindra and Mahindra Ltd, and Tata Motors Ltd dominate the rural vehicle market where foreign automakers are seen as expensive and distant.

Foreign companies showing cars at the Delhi auto show, starting on Wednesday, have already poured billions of dollars into factories, product development and marketing in India's once-booming car market. Still, no foreign car maker has a share of more than 6 percent in India's passenger vehicle market aside from South Korea's Hyundai Motor Co with 15 percent.

Car makers see success in rural areas as vital, as slow economic growth, high interest rates and rising fuel prices mean overall sales are headed for their second straight year of decline. Though the need for rural sales has been recognised, success could yet prove illusory.

Japan's Honda entered India nearly two decades ago but will still have only 170 dealerships by end-March, compared with market-leading Maruti's current 1,300. Of the 60 sales outlets Honda plans to open in India in the fiscal year that starts in April, 43 will be in small towns.

"It's very easy to travel once in three-four years to a place 100 kilometres away to buy," said Jnaneswar Sen, senior vice president of sales and marketing at Honda India. "It becomes a bit of a hassle for the customer to travel 100 or 150 kilometres every few months to get the car serviced."

Like most foreign carmakers in India, however, Honda is seen as a premium brand, beyond the reach of price-sensitive rural buyers. To expand its potential market, Honda last year launched the entry-level Amaze sedan, which starts at about 520,000 rupees ($8,300) and has helped it nearly double its market share to 4.7 percent.

Smaller towns and cities account for nearly two-thirds of Amaze sales, the company said. "Smaller towns and rural areas are a gold mine that foreign automakers are yet to tap efficiently," IHS Automotive analyst Anil Sharma said. "One of the prerequisites for any automaker to be successful in rural areas would be availability of after-market services. Since the population is more dispersed in rural areas, what we probably need is services like mobile workshops."

Selling foreign cars to rural India remains tough. Deepanshu Rai, who lives in Raigad, a small town about 100 kilometres from Mumbai, said he never considered buying a foreign model when he bought his first car about 10 months ago, an Alto 800 hatchback made by Maruti.

"If you buy a foreign brand, it won't have a service centre everywhere. You may have to travel far even for a small issue," said the 22-year-old Rai, who works for a mapping company.

For Maruti, the opposite is true. Founded in Gurgaon, outside the Indian capital of New Delhi in 1982, Maruti accounts for nearly one in two new cars sold in India. Though it has drawn on the small-car knowhow of Japan's Suzuki Motor Corp, its majority shareholder, Maruti is seen as so home-grown that in the 1980s, the word "Maruti" was used generically to mean any car.

On narrow rural roads, its cheap small cars jostle for space with Mahindra's sturdy utility vehicles, tractors, motorbikes and bullock carts, with foreign models scarce. Spare parts, including fakes, are cheap and ubiquitous, and mechanics everywhere can fix a Maruti, keeping maintenance costs down.

Maruti's deep rural penetration has helped it defend its market share amid the industry's two-year downturn. That's despite the onslaught of new models launched by foreign rivals.

Next in line will be Nissan Motor Co's relaunched low-end Datsun brand. At the Delhi auto show Datsun will showcase a hatchback to compete with Maruti's Alto 800, which starts at 280,000 rupees.

Areas with populations of less than 10,000 people account for 31 percent of Maruti's sales so far in the fiscal year that ends in March, said Mayank Pareek, Maruti's chief operating officer for marketing and sales, adding the company began a heavy push to target rural buyers five years ago. "Unlike urban markets, in the rural markets customers are very loyal. So you get a big first-mover advantage," he said.

General Motors has been selling cars in India since 1996. It has a market share of just 3.5 percent and 273 dealerships, increasing to 300 by the end of the next fiscal year. Most of the new outlets will be in smaller towns and rural areas, said P. Balendran, vice president at GM India.

"With higher growth expected in rural areas as compared with the metros, we expect the share of rural markets in our overall sales increasing in the future," he said.

One thing that is certain in the push by global car makers beyond India's big cities is more choice for the growing number of rural buyers. Until a few years ago, many rural buyers essentially had just one choice to make - the colour of their Maruti 800, the hatchback predecessor to the Alto.

Krishnakant Shinde, a farmer in Gove, a village about 250 kilometers from Mumbai, says he was the first in his village to buy a Volkswagen AG when he upgraded last October to a Vento sedan from a Maruti Swift Dzire entry-level sedan. Volkswagen, which has market share of just 2.25 percent in India, said it doesn't plan new outlets in the country this year. But it opened a dealership in Satara, a regional hub about 15 kilometres from Shinde's home, about two years ago.

"Volkswagen the company wasn't new to me, but I didn't buy earlier as I was worried about spare parts and servicing," said Shinde, a sugar cane and dairy farmer. "Now, since they have opened a showroom and service centre in Satara, I decided to buy."

Image
Abolition of Slavery to be celebrated on Wednesday
Tuesday, 26 May 2015
MARIGOT--The 167th anniversary of the abolition of slavery will be celebrated this coming Wednesday... Read more...
Judge extends detention of man who shot taxi driver
Tuesday, 26 May 2015
PHILIPSBURG--A judge of instruction on Monday extended the pre-trial detention of murder suspect... Read more...
Image
Celebrity Cruises to increase number of overnight port stays in Caribbean
Tuesday, 26 May 2015
BRIDGETOWN, Barbados--Selected regional destinations are expected to benefit from a decision by... Read more...
Image
CWC set to introduce post-hurricane drones
Monday, 25 May 2015
BRIDGETOWN, Barbados--With a week to go before the June 1 official start of the Atlantic hurricane... Read more...
Image
Texas governor says deadly flooding is worst ever seen
Monday, 25 May 2015
SAN ANTONIO--Texas Governor Greg Abbott on Monday described the flash flooding that had killed at... Read more...
Image
US heralds first Memorial Day without ground war in 14 years
Monday, 25 May 2015
ARLINGTON, Virginia- President Barack Obama heralded the first U.S. Memorial Day in 14 years... Read more...
Image
Tornado tears through Mexican city on Texas border, killing 13
Monday, 25 May 2015
CIUDAD ACUNA, Mexico--At least 13 people died and dozens more were injured after a freak tornado... Read more...
Image
More than 500 people killed as heat wave bakes parts of India
Monday, 25 May 2015
NEW DELHI--Soaring temperatures have gripped parts of southern and northern India in an extreme... Read more...
Image
Truckers' secret to fuel efficiency: take it easy
Tuesday, 26 May 2015
EAST DUBUQUE, Illinois--Mario Enriquez says there's no real trick to getting great fuel mileage in... Read more...
Image
Eyeing the next frontier, Miami law firms ramp up Cuba strategy
Tuesday, 26 May 2015
MIAMI--The Florida Bar is sending its first ever delegation of lawyers to Cuba this week to explore... Read more...
Image
Pure rhetoric
Tuesday, 26 May 2015
Dear Editor, Please allow me some space in your newspaper to address Member of Parliament Maurice... Read more...
Image
Faithful reader
Tuesday, 26 May 2015
Dear Queenie, Did you see all that melee in social media about not calling Ramesh Manek a... Read more...
Image
Medical School undefeated win Volleyball Championship
Monday, 25 May 2015
SABA--Medical School won their final two matches of the season to go undefeated, 6-0, in the Saba... Read more...
Image
L’Esperance wins Best Boat at Captain Oliver’s Regatta
Monday, 25 May 2015
OYSTER POND—Bobby Velasquez’s L’Esperance rounded off the season on a high this Sunday by... Read more...
Image
In North Korea, men call the shots, women make the money
Tuesday, 26 May 2015
SEOUL--North Korea is a militarized, male-dominated society, but it is women who are making the... Read more...
Image
Penguin film director gives climate warning in closer
Tuesday, 26 May 2015
CANNES, France--The French director who charmed the world and won an Oscar with his 2005... Read more...
Image
A Caribbean history questioned
Tuesday, 26 May 2015
~ Dismissing the cannibal myth ~ By Rik Haverman As a historian, I started to delve into the... Read more...
Image
Is Buying a Picasso the Best Way to Spend $180 Million?
Tuesday, 26 May 2015
By Montague Kobbé http://mtmkobbe.blogspot.com Last week Christie's made all the headlines after... Read more...
Editorial - Some form of local input
Tuesday, 26 May 2015
The tripartite meeting between the Dutch Caribbean countries to prepare for Wednesday’s... Read more...
Editorial Safety first
Monday, 25 May 2015
In a way today’s story about mandatory student identification (ID) cards is sad. For many... Read more...
Image
Monday May. 25, 2015
Monday, 25 May 2015
Image
Saturday May. 23, 2015
Friday, 22 May 2015
Notices May 26
Tuesday, 26 May 2015
Saturday, May 30 FREE HIV TESTING Organized by the St. Maarten AIDS Foundation Place: Belvedere... Read more...
Notices May 25
Monday, 25 May 2015
Summer Camp Skills Educational Summer Camp is registering children ages 3 to 18 for its Summer... Read more...