Auto: Racing Ahead

Notice that most commercials of two-wheeler and four-wheeler vehicles show rustic village scenes, rugged roads, crowded towns and several such shots. The commercials are not far from the truth. Sustainable growth in income, big business opportunities for corporates and a rise in aspirational level among masses have boosted the markets in India’s tier-2 cities. Traditionally known as smaller cities, demand for scooters to luxurious cars in these fast-emerging cities are on the verge of competing with metro cities.

One of the main reasons why few players like Maruti Suzuki, Hyundai India, Hero MotoCorp and Honda Motorcycle and Scooter India (HMSI) dominate India’s auto market is their vast dealership network in non-metros. Maruti Suzuki, the country’s largest automaker, has a record number of over 2,000 sales outlets (including Nexa and True Value) in the country.

Honda, India’s No. 2 and the fastest growing two-wheeler player with a strong presence in the tier-2 market, had earlier said that out of the 600-plus touch points it had planned to open in FY17, 70-75 per cent will be opened in tier-2 cities and beyond. Yamaha, another fast growing Japanese two-wheeler brand, has been focusing on expanding in tier-2 and -3 cities, to reach out to a larger group of the target population and that has been instrumental in boosting its sales.

For Royal Enfield, it will be tier-3 market, which will drive the next phase of growth. In a recent interview, MD and CEO of Eicher Motors Siddhartha Lal, said, “We have a very strong footprint in all large markets and tier-2 cities. There is scope to increase in new catchment areas around these markets and we continue to add stores. But our biggest expansion in numbers is coming from tier-3 towns where we are adding 2-3 stores every week. The current store count is around 650.”

Sandeep Aggarwal, Founder and CEO of online auto marketplace Droom, says, “Droom is still a largely urban customer-oriented market, with the highest response coming from Delhi-NCR, Ludhiana, Bengaluru and Jaipur. However, the response from tier-2/3 cities has been growing constantly, which gives us a lot of encouragement.

Driving Luxury
Tier-2 market has become a very big market for India’s booming luxury vehicle market. According to a survey by consultancy firm IMRB, 60 per cent of high net worth individuals residing in tier-2 and -3 towns own a car priced above Rs 35 lakh.

To create more awareness among luxury car lovers, companies such as Mercedes, Audi and BMW have initiated several unique programmes. To drive home brand Audi, the company is pushing its Audi mobile terminals (AMT) in smaller towns. AMTs are showrooms on wheels.

BMW India spokesperson had earlier told BW Businessworld that the company has introduced the BMW experience tour where future customers can experience driving pleasure across a range of BMW sedans and SAVs (sports activity vehicle) on a specially designed test course.

For Mercedes, 55 per cent of its sales come from markets other than Mumbai and Delhi. And that is where the company is focussing going forward. The company has opened as many as 10 showrooms last year, particularly in tier-2 and tier-3 cities to boost sales.

Not just the luxury car makers, super luxury car makers are also eyeing tier-2 cities as high potential markets. Lamborghini, the Volkswagen-owned sports car brand, recently said that the company is increasingly getting a significant portion of its sales from smaller towns and cities such as Coimbatore, Kochi, Jaipur, Kanpur, Jalandhar, Indore, Raipur, and Nagpur.

Harley-Davidson, which claims 60 per cent of the superbikes’ market in India, recently said it expects to continue its growth story in the coming financial year, fuelled by demand in tier-2 cities. “Harley-Davidson India currently has 26 dealerships across the country which would be enhanced by adding four new dealerships and expanding our footprint particularly in tier-2 cities,” says Pallavi Singh, Harley-Davidson India director (Marketing and Communications).

UK-based luxury two-wheeler maker Triumph Motorcycle is also looking at these growing markets to boost sales. Triumph has 14 dealerships across the country with plans to open two more at Goa and Bhubaneswar in the next 2-3 months.