Hyundai Drives Deeper into Rural India as SUV Demand Surges

As profits continue to decline, Hyundai Motor India is turning its focus to rural markets to offset weak urban demand. The company says SUV preference is rising sharply outside cities, a shift it called a “paradigm shift” in the industry. To tap into this trend, Hyundai plans to open 70% of its new showrooms in rural areas.

“I have spent thirty two years (in the industry). I never expected that rural (customers) will come out of small car market,” Hyundai India’s chief operating officer Tarun Garg said during an analyst call on Wednesday.

Before joining the South Korea based carmaker in 2019, Garg worked for over 25 years with Maruti Suzuki, the leader in the small car segment.

Hyundai sold 6.1% fewer cars in the first quarter of this financial year (Q1FY26). Its sales stood at 180,399 compared to 192,055 during the same period last year.

Its net profit fell 8% to Rs 1,396 crore from Rs 1,489 crore during the same period last year while consolidated revenue from operations declined 5.5% from Rs 17,344 crore in Q1FY25 to Rs 16,412 crore in Q1FY26.

About 47% of Hyundai’s current dealership network is in rural areas while the rest 53% is in urban areas.

Garg said rural market was simpler to predict in terms of demand drivers such as monsoon, MSP and road infrastructure whereas the urban demand gets affected by global scenarios.

“I'm making seven out of 10 outlets in the rural areas. So I have expedited the network in the rural areas considering that what kind of demand I am seeing there and considering especially the affinity to SUVs,” said Hyundai India’s chief operating officer Tarun Garg during an analyst call on Wednesday.

The rural market is generally considered favourable for hatchbacks and sedans. However, about 68% of Hyundai’s sales in rural areas came from SUVs.

Explaining the shift to SUVs, he said that it was not the vehicle’s body type but the features one gets in the same price range in SUVs compared to small cars.

“Customer choice has moved from hatches to SUVs in the same price range because he gets a better ground clearance, better visibility, six airbag as standard and a sunroof. He gets a very good body type,” he said.

The company said the overall subdued demand in the auto market weighed on its financials, which was partially offset by an increase of 13% in its export numbers. Hyundai exported 48,140 units in the June quarter compared to 42,600 units during the corresponding period last year.