The Indian automobile industry is facing one of its toughest periods in over a decade. In the period between April 2012 and February 2013, the industry registered a negative growth of -4.64% in the passenger cars segment. Sales of small and medium automobile segments are slacking off, which is in sharp contrast to the scorching pace of growth witnessed till a couple of years ago. Between FY2005-06 and FY2010-11, passenger car sales blazed at 15.2% per annum. That fell to 4.7% in FY2011-12, before languishing this past financial year.
The only silver lining has been the luxury end of the car market, which has been an exception to this anaemic trend. While the overall passenger vehicle industry has grown at a CAGR of 19.04% in the past four years, and the luxury vehicle segment has grown at a CAGR of 32.02% during the same period. Currently, of total car sales of 2.5 million, the luxury segment contributes only 1.2%. But the segment has been growing steadily over the past couple of years and is expected to contribute 4% of the total car sales in the next eight years. Experts believe that demand for luxury cars will rise to at least 50,000 vehicles by 2015, from 25,000 units sold in 2012.
Mercedes-Benz, which came to India in 1994, was the largest seller of luxury cars in India till a couple of years ago when fellow German rival, BMW, beat the company to the numero uno position in 2009. That year, Mercedes recorded 3,202 units in sales whereas BMW sold a good 3,587 units, topping the sales chart. Audi, which was then just making its presence felt in the Indian market, registered 58% of whopping yoy growth in 2009, selling 1,987 units. Since 2009, the competition has gotten more intense and scalding hot. The German players have been at each other’s throat, straining their muscles to outperform in the competitive luxury car market, which has grown thicker with the entry of newer players like Volvo and Jaguar Land Rover.
On one hand we have the entry level luxury brands like BMW, Audi, Mercedes and Volvo; on the other hand there are the mid-level luxury brands like Jaguar and Land Rover (starting from about Rs.5 million) and then there are the ultra-luxe brands, some of the biggest names in the sports car and super luxury segment, like Bentley, Lamborghini, Rolls Royce, Ferrari, Aston Martin, Maserati and Bugatti. The arrival of these big guns in the Indian market over the past two years has further redefined and segmented the luxury car market. So we now have the entry-level, mid-level, super luxury, sports cars and SUVs. Another key trend in this luxury space is the sudden upsurge in the entry level cars starting as low as Rs.2.2 million.
The trend was kicked off with BMW launching its X1 SUV model and lowering the entry level of its luxury cars to about Rs.2.2 million (ex-showroom). The idea is to generate volumes and so players like BMW are launching new products in the affordable luxury segment, where the demand actually is. In the process, the traditional luxury segment has now morphed into the premium category with most luxury car makers moving towards affordable luxury. In order to vroom ahead in this new “affordable luxury” category, BMW has introduced its sub-brand Mini Cooper, which it introduced at last year’s auto show in Delhi. It is planning to launch three models of this sub-brand in India − Mini Cooper, Mini Cooper convertible and Countryman, priced aggressively between Rs.2.49 million to Rs.3.19 million. Rivals Audi and Mercedes have also taken steps to create excitement in the entry level luxury segment. Last year saw Audi introduce its Q3 model (priced at Rs.2.67 million) while Mercedes has launched its B-class priced competitively at Rs.2.10 million, which competes with BMW X1 (priced at Rs.2.24 million).
As the churn in the luxury car market gets thicker, players are pulling out all the tricks to stay ahead in the competition by creating new segments and looking for new markets to generate demand. “As we move into the future, we are well positioned with a forward-looking strategy, progressive roadmap along with an exciting and emotional portfolio to tap the available market opportunities,” says Philipp Von Sahr, President, BMW India. So, BMW is tapping the market for commercial use of luxury cars such as premium hotels and cab owners and has gone for selling the stripped versions of its traditional luxury cars to generate incremental demand.
Likewise, Audi is contemplating to launch several initiatives on the pro\duct front this year. It plans to assemble the entry level Q3 SUV, which is giving good competition to the BMW X1, in India by the second quarter of this year. The price of Audi Q3, which starts from Rs.2.6 million, is expected to come down further once Audi starts assembling the Q3 in India. The car maker at present assembles sedan A4, A6 and SUV Q5, Q7 in India. Even, Mercedes has plans for expanding its product portfolio. “We would be launching one or two products, starting this year, with a B-class launch. And soon we would be launching an A-class product as well. Secondly, we are investing heavily on production at our factories. We want to make our CKD (complete knocked down) units because it take 2-3 years to get the CKD portfolio ready,” says Debashis Mitra, who was Director, Sales & Marketing, Mercedes India, before quitting just a few days ago.
The only silver lining has been the luxury end of the car market, which has been an exception to this anaemic trend. While the overall passenger vehicle industry has grown at a CAGR of 19.04% in the past four years, and the luxury vehicle segment has grown at a CAGR of 32.02% during the same period. Currently, of total car sales of 2.5 million, the luxury segment contributes only 1.2%. But the segment has been growing steadily over the past couple of years and is expected to contribute 4% of the total car sales in the next eight years. Experts believe that demand for luxury cars will rise to at least 50,000 vehicles by 2015, from 25,000 units sold in 2012.
Mercedes-Benz, which came to India in 1994, was the largest seller of luxury cars in India till a couple of years ago when fellow German rival, BMW, beat the company to the numero uno position in 2009. That year, Mercedes recorded 3,202 units in sales whereas BMW sold a good 3,587 units, topping the sales chart. Audi, which was then just making its presence felt in the Indian market, registered 58% of whopping yoy growth in 2009, selling 1,987 units. Since 2009, the competition has gotten more intense and scalding hot. The German players have been at each other’s throat, straining their muscles to outperform in the competitive luxury car market, which has grown thicker with the entry of newer players like Volvo and Jaguar Land Rover.
On one hand we have the entry level luxury brands like BMW, Audi, Mercedes and Volvo; on the other hand there are the mid-level luxury brands like Jaguar and Land Rover (starting from about Rs.5 million) and then there are the ultra-luxe brands, some of the biggest names in the sports car and super luxury segment, like Bentley, Lamborghini, Rolls Royce, Ferrari, Aston Martin, Maserati and Bugatti. The arrival of these big guns in the Indian market over the past two years has further redefined and segmented the luxury car market. So we now have the entry-level, mid-level, super luxury, sports cars and SUVs. Another key trend in this luxury space is the sudden upsurge in the entry level cars starting as low as Rs.2.2 million.
The trend was kicked off with BMW launching its X1 SUV model and lowering the entry level of its luxury cars to about Rs.2.2 million (ex-showroom). The idea is to generate volumes and so players like BMW are launching new products in the affordable luxury segment, where the demand actually is. In the process, the traditional luxury segment has now morphed into the premium category with most luxury car makers moving towards affordable luxury. In order to vroom ahead in this new “affordable luxury” category, BMW has introduced its sub-brand Mini Cooper, which it introduced at last year’s auto show in Delhi. It is planning to launch three models of this sub-brand in India − Mini Cooper, Mini Cooper convertible and Countryman, priced aggressively between Rs.2.49 million to Rs.3.19 million. Rivals Audi and Mercedes have also taken steps to create excitement in the entry level luxury segment. Last year saw Audi introduce its Q3 model (priced at Rs.2.67 million) while Mercedes has launched its B-class priced competitively at Rs.2.10 million, which competes with BMW X1 (priced at Rs.2.24 million).
As the churn in the luxury car market gets thicker, players are pulling out all the tricks to stay ahead in the competition by creating new segments and looking for new markets to generate demand. “As we move into the future, we are well positioned with a forward-looking strategy, progressive roadmap along with an exciting and emotional portfolio to tap the available market opportunities,” says Philipp Von Sahr, President, BMW India. So, BMW is tapping the market for commercial use of luxury cars such as premium hotels and cab owners and has gone for selling the stripped versions of its traditional luxury cars to generate incremental demand.
Likewise, Audi is contemplating to launch several initiatives on the pro\duct front this year. It plans to assemble the entry level Q3 SUV, which is giving good competition to the BMW X1, in India by the second quarter of this year. The price of Audi Q3, which starts from Rs.2.6 million, is expected to come down further once Audi starts assembling the Q3 in India. The car maker at present assembles sedan A4, A6 and SUV Q5, Q7 in India. Even, Mercedes has plans for expanding its product portfolio. “We would be launching one or two products, starting this year, with a B-class launch. And soon we would be launching an A-class product as well. Secondly, we are investing heavily on production at our factories. We want to make our CKD (complete knocked down) units because it take 2-3 years to get the CKD portfolio ready,” says Debashis Mitra, who was Director, Sales & Marketing, Mercedes India, before quitting just a few days ago.
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