Its rivals Maruti Suzuki, Tata Motors and Honda, too, are seeing a spike in demand for pricier SUVs from the hinterlands as increasing digital exposure and income parity narrow the gap in consumer preference between urban and rural areas.
"The gap in income levels between car buyers in rural versus urban areas has come down sharply over the last five years," said Tarun Garg, chief operating officer at Hyundai Motor India. "In the last one year itself, we have seen the number of first-time buyers go up 300 basis points to 44% in rural areas," he told ET.
SUVs such as Exter, Venue and Creta accounted for two-thirds (67%) of Hyundai's rural sales in the first four months of the calendar year, doubling their share since calendar 2020.
"There are more rural customers coming in from the service sector, road connectivity has improved, disposable income is up...and all these factors are leading to an increase in aspiration levels, which is translating into a strong demand for SUVs, even in these markets," Garg reasoned.
SUVs accounted for 70% of all cars Tata Motors sold in rural markets last financial year while for market leader Maruti Suzuki, rural areas accounted for 43% of the sales of Brezza, its highest-selling SUV, in the country in FY24.
Honda Cars India, too, said one-fourth of its sales of the newly launched SUV, Elevate, are coming from tier-3 and adjoining markets.
The Reserve Bank of India defines areas with a population less than 49,000 (Tier 3-6) as rural areas.
Carmakers attribute the spurt in SUV demand in rural areas to increasing incomes, aspirations as well as better roads.
"There is a strong interest in SUVs in these markets as customer aspirations and income levels are rising, road infrastructure has improved, and SUVs are also more suitable due to high ground clearance even in tougher road conditions when moving around," Kunal Behl, vice-president (marketing & sales) at Honda Cars India, told ET.
Rural poverty has declined by 440 basis points between FY19 and FY23, compared to 170 bp decline in urban poverty, bringing down the rural-urban divide, a study by State Bank of India (SBI) showed. Rural poverty declined to 7.2% in FY23, from 25.7% in FY12. Urban poverty came down to 4.6% from 13.7% during the same period.
Budget allocation for rural development projects has seen an upswing in the past few years, surging by 12% to Rs 1.77 lakh crore in FY25. Road connectivity has improved, and the Centre is set to construct another 12,000 km of highways this fiscal year.
At the same time, usage of smartphones has shot up. India has over 700 million smartphone users including 425 million in rural areas. This has helped bridge the gap in consumer aspirations and preferences between rural and urban markets.
"There is no significant difference in the preferences for SUV customers in rural and urban markets... Due to digital exposure, the preferences remain quite the same for most of our vehicles in urban and rural markets," said Partho Banerjee, senior executive officer (marketing and sales) at Maruti Suzuki.
Tata Motors said there has been a significant demand for its compact SUVs in rural markets in the last couple of years.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
