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Charge of the luxury car brigade

The luxury cars segment in India is bucking the trend with double-digit growth. Many new launches lie ahead. Sumant Banerji writes.

autos Updated: Oct 22, 2011 20:56 IST
Sumant Banerji

Back in 2009, even as the economy was recovering from the global economic recession of 2008, 42-year-old Pradeep Shukla, who owns a steel fabrication unit in UP, did something unexpected. He went ahead and bought Audi Q7, the burly SUV. In the process, Shukla realised his longstanding dream of owning a luxurious 4-wheel drive automobile.


"I remember when I first went to the Audi showroom in Gurgaon, the sales executive was taken aback that somebody wanted to buy a Q7 at that time," recalls Shukla. "He was even more astounded when I told him that I actually hailed from Meerut."

Even today, people like Shukla are fuelling the dizzy growth of luxury car sales in India.

Just like in 2008-09 when times were uncertain, this year, too, luxury car sales have continued unabated even as the overall growth story in the industry is under a cloud. The big three of the Indian luxury carmakers - BMW, Mercedes and Audi- as also the fast rising Jaguar Land Rover are witnessing high double-digit growth.

"Till date, this is the best year for BMW in India," says Andreas Schaaf, president, BMW India. "We've sold over 7,000 cars in the first 9 months of this year, which is more than what we sold for the whole of last year. This year, we are aiming to sell more than 10,000 units which is more than what any luxury car company has ever sold in a year in India."

To put things in perspective, the whole industry was selling less than what BMW would sell alone this year, till around 3 years back. And the potential for growth is such that the growth story will not pause anytime soon (see table). By 2020, the luxury car market is expected to be around 150,000 cars per annum. That would mean the industry would have grown 10 times in just a decade.

"The growth of the Chinese automotive market has surprised everybody but I am quite sure India is the next China," says Mercedes Benz India CEO Peter Honegg. "The growth here will be steadier but the volumes would grow. The fundamentals are right, the environment is improving, aspiration levels are rising and roads are getting better. All point towards the same thing...people would want to buy more cars."

A chunk of this growth would come from non-metro cities. At present, less than a third of sales come from tier II and tier III towns. By 2020, that number may go as high up as 50%, as showrooms come up across the country. "With more than 100,000 dollar millionaires in India, the potential in the luxury segment in India is huge," says Michael Perschke, head, Audi India. "The market has tripled in the last 5 years. We are optimistic about the growth in non-metro cities."

Companies are also looking at bringing in smaller products that would be less expensive and more practical than some of the other cars and appeal to a broader section of the market.

BMW, for instance, would bring in its subsidiary brand the iconic Mini next year that with its unmatched attractiveness to the youth is expected to create a completely new segment. Audi would bring in its most affordable SUV Q3 that would bring the sticker price down for the brand.

And with Mercedes deciding to bring in its entire range of cars to India, its compact A and B class cars may change the contours of the industry. "The hunger for cars here is immense and the market will grow both in the top and the bottom end," Honegg adds. "In 2010, we launched 22 models including facelifts in India. And that is not an aberration. The product offensive would continue."