Small Car Sales In India Plunge 75% As Rural Incomes Decline

(Bloomberg) -- India’s small car sales fell sharply as rural buyers’ incomes diminished following the country’s weakest monsoon in five years.

The sales of entry-level cars slumped 75% to 35,000 units in the three months through September from a year earlier, according to the Society of Indian Automobile Manufacturers. Sales of motorcycles and scooters — favored modes of transport in villages due to their affordability — also fell 39% and 25% respectively. 

Farm wages have remained subdued after a ban on wheat and rice exports hurt rural incomes. India’s June-September rainfall, which waters half of the country’s farmland, also remained deficient, threatening crop harvests and adding to rural stress.

Rural income levels are lower than before, said SIAM President Vinod Aggarwal on Monday. “Prices of entry-level cars have increased due to regulatory changes,” he said. “Because of this gap, the demand for entry-level segment is low.” 

Read more: Modi Eyes Giving Small Farmers More Cash Ahead of Polls 

While the small car market shrinks, demand for bigger sport utility vehicles among India’s aspirational middle class is increasing. Domestic utility vehicle sales rose 23% to 639,552 units during the quarter.

Passenger vehicle sales rose to 361,717 in September from 359,228 units in August. 

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