t’s a dichotomy that just can’t be ignored, high-end consumers had to await their turn to book the Mercedes-Benz S 500 priced at nearly Rs 1.6 crore at the beginning of this year, and this Germany-based luxury car manufacturer sold 125 cars within a fortnight to buyers who hadn’t even seen this model. And, when this car model was unveiled in mid-January, the frenzy amongst buyers and the media reached a different ‘level’.
In contrast, total sales of passenger vehicles during the first nine months of the current fiscal declined 5.7 per cent year-on–year, and the high cost of finance and surging prices of auto fuel were the key factors for first-time buyers to postpone their purchase decision. No doubt, the luxury segment accounts for barely one per cent of total passenger vehicle segment, but the number of ultra high networth individuals in the country expanded 24 per cent y-o-y to 1,00,900 at the end of fiscal ’13, according to a Kotak Wealth Management and CRISIL Research study, and overseas auto makers are in an overdrive.
Mumbai and New Delhi currently account for nearly half of the total sales in the luxury vehicle segment, but top-level executives and professionals in tier-II and-III towns are also developing a ‘taste’ for such products. As a result, players like BMW India, Audi India, and Mercedes-Benz India are expanding their distribution network in smaller towns along with introducing more ‘value-based’ models, with cars priced from Rs 25 lakh.
Striking a similar view, Philipp von Sahr, President, BMW Group India, said, “More and more young and successful people have the money to buy high-end cars.”
Similarly, a recent report by CII and IMRB also highlighted that the luxury market in the country has grown at a compounded rate of 15 per cent over the past three years, and that was largely ‘powered’ by premium cars.
Not just for ‘super rich’
The total sales of luxury cars in the country was 31,000 units during ’13, and is projected to reach 52,000 over the next four years, according to the consultancy IHS.
Auto luxury players highlighted that in western countries these high-end cars are increasingly becoming the norm, and they are attempting to create a similar demand in the domestic market.
And, to leverage this growth opportunity, Audi India will roll out its A3 model later this year, and it would be competitively priced vis-à-vis high-end sedans, which are typically retailed between Rs 21-24 lakh. In addition, this player will expand its distribution network in smaller cities by five this year, and its retail chain would reach 40 centres.
Terence Johnsson, Vice President - overseas sales of Audi AG, said, “Expanding our presence in India is an absolute priority for us.”
Similarly, Mercedes Benz’s A-Class offers cars from Rs 23.8 lakh while the BMW 3 Series is priced from Rs 29.9 lakh. A senior official from Mercedes-Benz also pointed out that they have a twin strategy to grow both the entry-level segment of their portfolio along with the premium end. Olla Kallenius, Head – marketing and sales, Mercedes-Benz Cars, in a media interaction, said, “We are aiming to grow our sales at the entry level as well at the top-of the-line segment in the local market.”
Harish Bijoor of Harish Bijoor Consults stressed on the need for luxury makers to ensure a truly out-of the-world experience, both in-store and after-sales, even while pursuing an expansion in the distribution network in smaller towns. In addition, these players would need to “adapt” their retail strategy to local requirements including in-store staff who can communicate with customers in the regional language.
It’s no surprise that Chandigarh and Kochi have emerged as emerging ‘hubs’ for sales of these premium cars, with a growing number of businessman and senior executives making a purchase. As a result, BMW India is also expanding its retail network to 50 centres, shortly.
The boom in the luxury segment is not just limited to four-wheelers, with premium motorcycles that are also increasingly sought after. And, the US-based Indian Motorcycle International recently launched its Chief Classic priced at Rs 26.5 lakh. In contrast, the iconic Harley-Davidson is widening its target audience via the Street 750 priced at Rs 4.1 lakh as well as expanding its distribution network to Indore, Pune and Jaipur.
Clearly, luxury is in demand.