Rural Focus Helps Maruti Suzuki Battle Sales Slump

MUMBAI – India's 2013 auto sales declined 7.2% to a little over 3 million units, WardsAuto data shows, but Maruti Suzuki maintained deliveries at almost the same level of the previous year – a little over 1 million.

Even in the first four months of 2014, when industrywide sales declined 10.7% to just over 1 million units, Maruti Suzuki was able to restrict its decline 7.9%, to 377,715.

The results reflect India’s No.1 automaker’s 5-point strategy: a powerful rural focus, a top-class service network, intensive niche marketing, its True Value used-car-resale program and customized, innovative accessories.

Maruti Suzuki not only has held its own during the industry slump, but it is looking to improve. The automaker has set a challenging target of 9% to 10% overall growth in the current fiscal year, and 15% in rural areas.

“Rural sales that contributed 9% of Maruti's total domestic sales five years ago have risen to 32% in fiscal 2013-14,” Vice President K.D. Singh notes.

Chief Operating Officer Mayank Pareek says half of Maruti’s 1,331 sales outlets serve rural villages with populations of less than 10,000 as their neighboring towns, and it plans to double the number of retailers over the next three years.

The rural outreach is spearheaded by 7,500 resident dealer sales executives who handle sales, market research and identification of potential customers. “We have just scratched the surface of the rural markets so far. We are enlarging our reach to these groups and adapting our facilities and services to their needs,” one executive says.

Rural markets are served by Maruti Mobile Services, which provides 40,000 on-call repair and maintenance services every month.

Maruti Suzuki’s True Value division buys used cars, then refurbishes and re-sells them. Sales increased 16% in the 2012-2013 fiscal year to 289,000.

The automaker also offers more than 4,000 accessories allowing buyers a high degree of customization.

The marketing efforts have succeeded against a backdrop of uncertainty surrounding a new plant with initial annual capacity of 250,000 units scheduled for completion in the 2015-2016 fiscal year in Gujarat.

The factory is to be built by Suzuki Motors Gujarat, a wholly owned subsidiary of Japanese parent Suzuki. Maruti Suzuki will handle distribution and sales.

The government offered financial incentives including exemption from value-added tax to Maruti Suzuki but says those cannot be offered to Suzuki Motors Gujarat as it is a direct foreign investment. The Gujarat plant has been held up while Maruti Suzuki asks the government to reconsider offering the VAT exemption to both the production and sales operations.