Maruti Suzuki, the country’s largest carmaker, said it is seeing incremental volumes from its top 10 cities by sales — a geography that was stagnant for most part of the last financial year.

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The company registered 25% growth in sales in the top 10 cities in May (over April), while year on year, the growth was 15%, Ajay Seth, chief financial officer, Maruti, said.

The company registered a 28% YoY growth in overall sales in May, at 102175 units.

Although Maruti is heavily dependent on volumes from the non-top-10 cities, the revival in the bigger markets will largely benefit the carmaker.

Last year, on the sidelines of the SIAM conference, Mayank Pareek, executive officer (marketing and sales), had said that there was 3% year-on-year (YoY) decline in urban-market sales in April to June.

“From July 2009 onwards, we are seeing a positive trend and hope for a double-digit growth from the top 10 cities. Until August last year, except for Bangalore and Chennai, the response from the other 8 cities has been good. These two cities, being IT industry hubs, are still showing negative growth,” he had said.

Seth said the growth in bigger cities has been possible despite the intensifying competition due to the company’s multiple-product-in-the-same-category approach. The improving economy and return of jobs stability helped the company maintain its 54% market share.

A Citi financial report had stated that while aggregate industry growth will be 5% CAGR over FY08-10; pent-up demand could positively surprise in FY11/12.

Until last financial year the growth in the urban cities was almost flat and it was the rural market that was showing good numbers.

“The rural areas got a massive boost in the form of higher MSP and more disposable income, due to which we saw more buying taking place in that segment. But this year the trend has reversed and it’s the urban areas that are growing in excess of 25% while the rural is managing the pace of 8-10%. The Urban guys are buying with a vengeance while the rural market seems to have been saturated,” said Mahantesh Sabarad, analyst, Fortune Equity Brokers India Ltd.

The top 10 cities contribute close to 40% of the total revenues of the company and Seth added that this split will remain. “In fact, 3-4 years ago, the split was 50:50 and since then its tilting more towards the non top 10 cities as this is where the growth is coming from,” Seth said.

And despite the urban cities demonstrating promising growth, Maruti will stick to its semi-urban/rural drive. Seth said, “In FY09 the rural sector contributed around 8% to our revenues and this has seen a 111% increase in FY10. The growth story lies in the smaller towns and rural areas and we continue to keep our focus heavy on them.”

Maruti plans to keep the momentum going with the launch of Kizashi in A4 segment, R3 Van and launches in the alternate fuel/CNG segment.

With the demand returning in the top 10 cities the company is positive on volume growth but cautious on margins on account of rising raw material prices, adverse forex movement and new launch/product development costs.