In-depth: Auto industry rides on rural resurgence to bounce back closer to pre-Covid baseline

As the Covid-19 lockdown eases, barring a few segments, most of the sectors are rebounding sooner than later. In the second quarter (April, May, June) of the calendar year 2020, July looks positive for the auto category as major players in the market (both two-wheelers and four) witness higher demands.

Vijay Kaul

“From June, we started seeing higher traction and the demand bouncing back closer to the baseline of pre-Covid. We surely see a surge in website traffic and search volume for our category (two-wheeler),” said Vijay Kaul, Deputy General Manager, Marketing Communication, Yamaha India.

Kaul said cities where cases are low and mobility is getting back to normal has seen positive enquiries for two-wheelers since the anxiety of getting into public transport in this situation is creating a need for owned vehicles.

After the lockdown started in the last week of March, the auto category had almost no retail in the month of April, for four-wheelers in particular.

With relaxations and newer norms, as soon as showrooms and outlets started opening sometime around the beginning of May, there has been a rapid progress both in terms of retail and also in after-service of vehicles.

Shashank Srivastava

Shashank Srivastava, Executive Director, Marketing and Sales, Maruti Suzuki, India, said the company has about 3,100 outlets and it has already opened almost 2,800 starting mid-May till it became almost normal in June and correspondingly sales have also grown.

“In April, the retail was zero but for May, roughly the retail in the industry is about 60,000 cars, out of which Maruti Suzuki sold about 30,000. And then subsequently in June, it has been much better. There are retail estimates, around 170,000 or so, and Maruti Suzuki is roughly 90,000. With this rapid progress, June was about three times of May,” he said.

He said that on the customer side, bookings, inquiries and retail is roughly about 85% of the pre-Covid times.

It was reported that Hero MotoCorp sold 450,000 vehicles last month, up from 112,000 in May and the June figures represent about 90% of its sales in January, before the coronavirus health crisis took hold in India.

And this progressive growth can fairly be attributed to the partial or full movements in non-metros.
If sectoral growth is compared with the previous year, there was de-growth across all markets.

However, the recovery rate is much faster in rural and smaller towns this year and that is probably because of better rabi and khari crops and expected better winters this year in terms of agri business. Plus, the less prevalence of Covid in rural areas, said Srivastava.

The government’s outlay has been much more in rural areas. Thus, the overall sentiments are better in non-metros, especially in rural.

Kaul said, “Cities with higher dependency on public transport will push the demand. But entry-level commuter segment in rural and smaller towns has shown a greater degree of surge in enquires and sales.”

For the brands in the premium segment, he said the market will surely see a sharp demand more in metros and urban areas than rural.

And since Yamaha is focusing more on deluxe, premium and scooters, its advertising budgets won’t change much for rural. However, it is keeping a close watch on this market as well.

“Down the line, smaller towns will eventually grow (for us) which will be dealt with a focused strategy in the long run,” said Kaul.

In case of four-wheelers, the rural market interestingly has been a good contributor and this phenomena of rural demand increasing can actually been seen in the last 10-11 years.

In case of Maruti Suzuki, its contribution from rural sales to the total sales was just about 7-8% sometime in 2007. But last year, the total contribution became 38%. And in the first three months of this year, it is now almost 40%.

“This trend of rural demand increasing for automobiles and the penetration of automobiles in rural areas increasing has been going on for some time as the statistics clearly show,” said Srivastava.

And in response, the company is trying to adjust its media plans accordingly since language and medium changes for rural markets.

The company’s communication and spends are bifurcated on the basis of geographies (urban versus rural), type of media and genre for TV (which is more inclined towards news and GEC in times of Covid). 

The company has greater outlays in digital for communication, including social media, while it is decreasing its participation in OOH and print in urban markets. In rural areas, along with digital it is also investing in print.

It is interesting to note that how almost every brand had predicted the next wave of growth coming from smaller towns and rural areas.

Even various reports, including BCG, predicted the recovery period for regular activities much faster across small towns and rural.

While tier II/tier III cities of India are on a faster recovery, extended lockdowns, increase in number of cases, crumbling healthcare have further slowed down revival in the urban markets.

However, perception-wise, these (rural) markets always remained additional/surplus to focus on and not equal to or more important than metros. So much so that media planners still perceive smaller markets to be not functioning because metros are shut.

But with the kind of data intelligence today, every marketer and planner is able to gauge the growth, trends and demand even to the micro level, said Kaul. 

Penetration of free-to-air channels and mobiles in rural, especially with Jio’s enormous reach in rural India with low data cost, has changed the landscape of media consumption.  A good harvest season and decent monsoon is expected to push more demand for agriculture products.  Along with this, technology will help connecting buyers and sellers and this will eventually push rural agri business.

Hence, these cash-rich rural markets cannot be ignored, he said.

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