New millionaires fuelling luxury car sales

Luxe loves numbers, too.

The luxury car segment, nestled far from the madding crowd of mass market models, well beyond the last discounts, has lately been seeing a lot of activity.

And though the proportion of such car sales to the total car market remains small, the numbers are clearly growing, thanks mainly to the swelling population of high networth individuals and the propensity to spend thereof.

Typically, these are cars priced at the end of the premium car market, say around Rs25-30 lakh and running into crores.

The major players include marques such as Mercedes, BMW and Audi, which split nearly four-fifths of the market among them, with the likes of Porsche, Jaguar Land Rover hot on their heels.
Industry experts see the segment growing 30-40% during the current fiscal.

“The luxury car market in India is still small. We expect total sales in the industry to touch around 14,000 units this year. However, we are positive that the market will grow exponentially,” says Michael Perschke, head, Audi India.

“If the overall automobile market will exceed 5 million (units) in 2020, the luxury share should be approximately 1.5-2%, giving it a potential of up to 100,000 (units),” says Perschke.

Mercedes, which recently regained the top position in the luxury segment, claims to have pulled ahead of BMW by around 200 units already.

“We currently have a market share of about 42%, ahead of our competition,” says Debashis Mitra, director - sales and marketing, Mercedes Benz India.

For the January-August period, BMW India’s sales stood at 3,301 cars, translating into a growth of more than 40% year on year.
Audi, also a German carmaker, sold 302 cars in September, a 47% growth year on year, taking its tally for the January-September period to 2,178 units, up 63% vis-a-vis the previous year.

Fuelling this growth is the significant increase in the number of millionaires in recent years. The emergence of an ambitious middle class with increased purchasing power that understands values and aspires to own a luxury brand is a key contributor, too, says the World Wealth Report 2009 released by Merrill Lynch recently.

On their part, the luxury players are aggressively tapping the growing potential by expanding dealer networks and tapping into newer cities.

“Our focus on network expansion and the introduction of new and energetic products over the next few months, is in line with our growth strategy for India,” says Perschke.
 
Among others, Mercedes already has around more than 50 touch points across the country, while BMW plans to increase its dealership count from 18 to 22 in 2011.

“Earlier 70% of our business came from Mumbai and Delhi. However, the trend is shifting towards second level cities like Chennai, Bangalore, Kolkata etc,” says Mitra.

But there is a lot of traction from smaller cities like Coimbatore, Indore, Lucknow, Surat, Bhubaneswar and Ludhiana as well.
“India is poised to become a hub for global luxury brands in the next 4-5 years. And this growth will be fuelled from not just the metros but also the Tier II and Tier III cities,” says Perschke.
Meanwhile, the luxury car space has been getting more exciting with a host of new launches due later this year.

Mercedes has launched 18 models since January this year and is in the process of announcing new models.

Audi is soon going to introduce its flagship Audi A8 L and the Audi R8 V10 in India.

BMW, meanwhile, is reportedly getting into the volume game with introduction of sport utility vehicle X1, priced around of Rs 25 lakh. The car will be fully assembled at the company’s Chennai plant.

“If we notice, the maximum variants that are getting launched are in the higher end. The increased purchasing power and change in consumer attitude is the biggest driver for luxury car manufacturers. The market growing beyond metros is the icing on cake,” says Ganesh Releker, director, client solutions, AC Nielsen.