Flashy Cars are Here To Stay

On October 15, 2010, the city of Aurangabad made the news for a peculiar reason. Known for its famous Ajanta caves and below par civic amenities, it witnessed the highest luxury car sales ever recorded on a single day. 150 brand new Mercedes Benz rolled out onto the streets, a transaction valued at over 65 crore—every dealer’s elusive dream transaction. Tier II cities are now the go-to places for marketers at a time when political and economic uncertainty looms large in the country. While Audi is looking at Coimbatore and Lucknow, Mercedes has finalized on Raipur and Nashik.

Flaunting high-end luxury cars would be considered a sin in a country where 350 million people live below poverty line, but this mindset is slowly changing.  As if reflecting the sentiment the Auto manufacturers, especially in the luxury car segment, have had a slew of launches at the New Delhi Auto Expo 2012. The big three in the luxury automobile market—BMW, Audi and Mercedes—are battling to win the crown of market leader.

Though Mercedes has an advantage of an early entry as they have been in the country for close to 17 years, their market leadership toppled in a span of three years by BMW which entered in 2007, a feat which Audi is not far from achieving. Audi clocked a staggering 83% growth in sales in 2011 on a year-on-year basis leaving BMW (70%) and Mercedes (31%) far behind. Between the three, they have sold close to 22000 units in 2011 as compared to 16000 in 2010 corresponding to a growth rate of over 40%, while the overall car market has fallen flat with a growth of mere 6%.

Another push factor for the luxury segment is that it’s reasonably insulated from Inflation. An increase in prices of raw materials hardly affects luxury car brands. With a price range of over 25 lakh the raw material cost, when added to the selling price, becomes negligible.

The luxury car market has now evolved to a point where customers are constantly looking for upgradations. This also means that the used car segment of luxury cars, unthinkable up until three years ago, is now an icing on top of the cake for auto manufacturers. Mr Micheal Persche, Audi India Head, expects the used car program to contribute to 10% of the total revenues of Audi and plans to take it to 25% over a five year period. Audi has also announced the integration of its used car program “Audi Approved Plus” into its existing dealership networks across India.

Fortunes for the luxury car market in 2012 are tantalizingly poised with encouraging sales figures in 2011 despite being shadowed by the global economic uncertainty and fears of a double-dip recession hitting the U.S. The overwhelming response shown by dealers and component manufacturers at New Delhi Auto Expo might just prove to be the catalyst that automotive industry had been longing for.