SUVs dominate rural India: Hyundai's sales in January-April 2024 surge

During January-April 2024, Hyundai Motor’s top three selling cars in rural India were all SUVs, pushing the small car Grand i10 off the top spots for the first time, according to a report by The Economic Times. This shift highlights the rising aspirations and purchasing power of rural buyers in India.

Competitors like Maruti Suzuki, Tata Motors, and Honda are also experiencing increased demand for higher-priced SUVs in rural areas. Enhanced digital exposure and income parity are narrowing the consumer preference gap between urban and rural regions, ET added.

In the first four months of this year, SUVs like the Exter, Venue, and Creta made up 67 per cent of Hyundai's rural sales, doubling their share since 2020.

“The gap in income levels between car buyers in rural versus urban areas has come down sharply over the last five years," ET said, citing 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 per cent in rural areas,” he added.

Last financial year, SUVs comprised 70 per cent of Tata Motors’ rural sales, while for Maruti Suzuki, rural areas accounted for 43 per cent of Brezza sales, its top-selling SUV. Honda Cars India also reported that one-fourth of sales for its new SUV, Elevate, came from Tier-III and adjacent markets.

Why is rural demand for SUVs rising?

Carmakers attribute the surge in rural SUV demand to rising incomes, aspirations, and improved roads.

Garg explained that increased rural service sector employment, improved road connectivity, and higher disposable incomes are driving aspirations and, consequently, strong SUV demand in these markets.

The Reserve Bank of India defines rural areas as those with populations under 49,000 (Tier III-VI).

A study by the State Bank of India (SBI) showed that rural poverty declined by 440 basis points between FY19 and FY23, compared to a 170 basis point decline in urban poverty, reducing the rural-urban divide. Rural poverty dropped to 7.2 per cent in FY23 from 25.7 per cent in FY12, while urban poverty decreased to 4.6 per cent from 13.7 per cent in the same period.

Budget allocations for rural development have also increased, with a 12 per cent rise to Rs 1.77 lakh crore in FY25. Improved road connectivity includes plans for an additional 12,000 km of highways this fiscal year.

Smartphone usage has also surged, with over 700 million users in India, including 425 million in rural areas. This digital growth has helped align consumer aspirations and preferences across rural and urban markets.

Tata Motors noted significant demand for its compact SUVs in rural markets over the past few years.