The increase in disposable income, industry watchers said, will likely boost sales of discretionary items like two-wheelers and cars.Rural markets have outpaced urban in two-wheeler sales growth for the first time since the pandemic, with executives at Hero MotoCorp, Honda Motorcycle & Scooter India and TVS Motor Co noting signs of a rebound in rural discretionary spending.
Registrations of motorcycles, scooters and mopeds in rural markets increased by 8-9% in the first half of the fiscal year, against a 7% growth in urban sales.
Leading carmakers Maruti Suzuki and Hyundai Motor India have also reported stronger rural sales growth compared to urban markets in the past few months, mirroring the trend in the fast-moving consumer goods (FMCG) industry, as urban consumption has softened due to inflationary pressures.
A good monsoon, healthy agriculture yields and the government's decision to set minimum support prices for key kharif crops are expected to put more money in the hands of rural buyers and sustain demand in the coming quarters, industry executives said.
They believe increase in central government employees' dearness allowance will help lift urban demand as well, despite post-pandemic pent-up demand waning, and fewer vehicle launches. "All these will percolate down, in terms of income at the bottom of the pyramid and employment," said Niranjan Gupta, chief executive of Hero MotoCorp, the country's largest two-wheeler maker. "We are seeing green shoots (in rural areas), and moving forward, we see positive momentum."
The increase in disposable income, industry watchers said, will likely boost sales of discretionary items like two-wheelers and cars.
Hero MotoCorp said sales during the month-long festive period rose 13% year-on-year to 1.59 million units this year, led by demand for 100cc and 125cc motorcycles - an indicator of improved consumer sentiments in rural India.
TVS Motor Company chief executive KN Radhakrishnan said it was the first uptick since Covid-19, though the gap is not too large.
"After a long time, (rural growth) is 1% higher (than urban growth)," he said. "It is critical. With good monsoons, reservoir (levels), agriculture (output), we see rural slowly picking up. It will be good news for the two-wheeler industry."
Rural markets account for more than half of all two-wheeler sales as well as about a third of all car sales in the country.
Among carmakers, Maruti reported an 8% rise in rural sales in the first half of the financial year, compared to a 2% decline in urban markets. While urban demand did pick up during the festive season in October, rural sales growth, at 31.6%, was double that of urban areas at 14.8% for the carmaker.
Partho Banerjee, senior executive officer (marketing and sales) at Maruti Suzuki, said the share of rural markets in the company's total volume sales increased by 3.5 percentage points to 48.3% in the first seven months of the fiscal, on the back of a 12.4% growth in sales.
Hyundai and Tata Motors also reported 5-6% higher sales growth in rural markets than urban areas between April and October FY25.
Festivitites draw rural buyers
At Tata Motors, vehicle retails in rural markets increased by 40% last month, compared to October 2023. "Rural markets responded better in terms of retail during the festivity," said Amit Kamat, chief commercial officer at Tata Motors Passenger Vehicles. "There was positivity on account of normal rainfall and better crop yield."
Rural markets, at present contribute 41% to overall volumes at Tata Motors. Interestingly, it is not hatchbacks but SUVs that are drawing buyers in rural markets for Tata Motors. As much as 60% of the company's sales in rural centres are coming in from SUVs, Kamat said.
