Saturday, Dec 20th

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

bestOf2014

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
43 graduate from St. Dominic High, Schaminee, Nebhwani valedictorians
Friday, 19 December 2014
SOUTH REWARD--Forty three students graduated from St. Dominic High School on Thursday evening in a... Read more...
Majority adopts Urban Code at Council meeting
Friday, 19 December 2014
MARIGOT--The majority party adopted the new Urban Code at the year’s last Territorial Council... Read more...
Image
Chastanet – Over-reaction to reports of plan to assassinate St. Lucia PM
Friday, 19 December 2014
CASTRIES, St. Lucia--The leader of the main opposition United Workers Party (UWP) Allen Chastanet... Read more...
Image
Prisons officers threaten shutdown
Thursday, 18 December 2014
PORT OF SPAIN--Prisons officers are threatening to shut down operations at the country's penal... Read more...
Image
President's year-end message to Americans: I'm not a lame duck
Friday, 19 December 2014
WASHINGTON--If U.S. President Barack Obama is feeling the pain from a rough year at the office, he... Read more...
Obama vows US response to North Korea over cyberattack
Friday, 19 December 2014
WASHINGTON--President Barack Obama vowed on Friday to respond to a devastating cyberattack on Sony... Read more...
Image
Mother arrested for murder after children found dead in Australia
Friday, 19 December 2014
SYDNEY--The 37-year-old mother of most of the eight children found dead in a mass stabbing in... Read more...
Image
Swiss seek to make amends for "contract child" labour
Friday, 19 December 2014
BERNE--A campaign seeking financial restitution for thousands of Swiss children once forced into... Read more...
Image
Hong Kong ex-official, property tycoon guilty in corruption case
Friday, 19 December 2014
HONG KONG--A former top Hong Kong civil servant was found guilty on Friday of accepting HK$8.5... Read more...
Russia's parliament rushes through bill boosting banking capital
Friday, 19 December 2014
MOSCOW--Russia's lower house of parliament hastily approved a draft law on Friday that would give... Read more...
Image
We need a reduction in the fuel clause now
Friday, 19 December 2014
Dear Editor, Please allow me some space in your newspaper to share OSPP’s written request, on... Read more...
Image
Santa’s helper
Friday, 19 December 2014
Dear Queenie, No matter what kind of gift I give my sister she is never pleased with it. She... Read more...
Image
Rotary Youth Soccer Competition
Friday, 19 December 2014
Genevieve de Weever School won the Rotary Youth Soccer Competition at Raoul Illidge Sports Complex... Read more...
Image
Accolades pour in for Lakers' Bryant  
Friday, 19 December 2014
LOS ANGELES-- Los Angeles Lakers shooting guard Kobe Bryant has often been a polarizing figure... Read more...
Image
George Clooney criticizes Hollywood in cyberattack
Friday, 19 December 2014
NEW YORK--Oscar winner George Clooney slammed Hollywood power players for not supporting Sony... Read more...
Image
Stars fill the stage Thursday as Colbert closes his Report
Friday, 19 December 2014
NEW YORK--Stephen Colbert filed his final "Colbert Report" on Thursday, bidding farewell to his... Read more...
Image
EPIC Eco-Labels
Friday, 19 December 2014
~ Creating corporate responsibility ~ By Laura Bijnsdorp Yesterday, three locations were awarded... Read more...
Image
Saba Spotlight – Els Mommers
Friday, 19 December 2014
A closer look at the woman behind the art Els Mommers has been a renowned artist for many years.... Read more...
Editorial - Hit the ground running
Friday, 19 December 2014
After all the political turmoil over the last few months the installation of the Gumbs cabinet can... Read more...
Editorial - Inconclusive
Thursday, 18 December 2014
The referendum in St. Eustatius fell far short of the 60 per cent turnout considered the minimum to... Read more...
Image
Saturday Dec. 20, 2014
Friday, 19 December 2014
Image
Friday Dec. 19, 2014
Friday, 19 December 2014
Notices December 20
Friday, 19 December 2014
Sunday, December 21 AQUATHLON Organised by Tri-Sport Description: 1Km Swim followed by a 5Km (Short... Read more...
Notices December 19
Thursday, 18 December 2014
Sunday, December 21 AQUATHLON Organised by Tri-Sport Description: 1Km Swim followed by a 5Km (Short... Read more...