Luxury cars rev up, overtake premium sedans with lower prices, discounts

Written by Roudra Bhattacharya | New Delhi | Updated: Mar 8 2013, 15:34pm hrs
Hot carVolkswagen Vento by paying just Rs 1, Honda at 0.01% interest rate, Hyundai Eon 'free'. (Thinkstock)
The premium sedan segment, consisting of cars such as the Honda Accord, Toyota Camry and Skoda Superb, is facing some serious competition from new models by luxury carmakers with similar or lower price points.

Sales of premium cars fell sharply by 34% to 2,804 units between April and November of the current fiscal as compared to 4,256 units in the same period in FY12. Segment leader Skoda Superb managed monthly average sales of about 160 units in the eight months, while market leader of yesteryear, Honda Accord, sold only 36 units a month on average.

In comparison, the leader in the entry-level luxury sedan segment, BMW's new 3-Series, saw monthly average volumes over two times the Skoda Superb at around 400 units in the period. Mercedes-Benz' C-Class also sells about 300 units a month.

Jnaneswar Sen, senior vice-president for marketing and sales, Honda Cars India said, Pricing of luxury cars are now very close to executive sedans and I wonder how they are sustaining it. Accord's sales are mostly affected by smaller sedans by luxury carmakers. To improve our volumes, we are training dealers on pushing the value and lower maintenance costs of the Accord.The main blow has come from new entry price points being offered by luxury carmakers to increase their customer base with more affordable models. The trend was started by BMW when it launched the X1 in late 2010 at R22 lakh the model gave it a sharp lead in volumes over rivals. Then in June 2012, Audi launched the Q3 compact SUV at R26 lakh.

Rival Mercedes-Benz also jumped into the fray but chose a slightly different path by creating a new sub-segment. It launched the B Class Sports Tourer, the first large hatchback among luxury carmakers, in September priced at R21 lakh. BMW will join Mercedes next year when it launches the 1-Series hatchback in India and brings the entry price point for the whole segment further down to R20 lakh. Mercedes will also launch a smaller hatch, the A Class, next year.

In comparison, the top-end Accord is priced at R28 lakh, while a higher-end Superb and Camry are both available at R24 lakh.

V G Ramakrishnan, managing director at Frost & Sullivan, South Asia, said premium carmakers can survive the slowdown by reducing prices after investing in local manufacturing and sourcing more components at home. From a tax point, imported premium cars (as knocked-down units) are charged similarly as luxury cars, so reducing prices is tough today. There are too many products around R20 lakh, so premium car prices need to be reduced. It's tough for them to survive at the current prices, because in terms of aspirations, luxury cars are way above.The second big hit for the premium car segment came from the price wars and high levels of discounts offered on select luxury car models, reportedly stretching up to R8-10 lakh. This made luxury cars such as the BMW X1, Mercedes-Benz C-Class and Audi's A4 sharply cheaper than premium cars like Accord, Volkswagen Passat, Toyota Camry and Skoda Superb.

"When available at the same price, customers would definitely choose a luxury car over a premium model like the Accord. In that segment, its all about brand aspiration and a buyer would want as much bang for the buck as possible, an industry executive said.

In reverse gear

* Sales of premium cars fell sharply by 34% to 2,804 units between April and November of the current fiscal as compared to 4,256 units in the same period in FY12

TOP SPEED

BMW's new 3-Series saw monthly average volumes over two times the Skoda Superb at around 400 units in the period. Mercedes-Benz' C-Class also sells about 300 units a month.

What will you drive

* HondaAccord R28 lakh

* Skoda Superb, Toyota Camry R24 lakh

* Mercedez-Benz B Class Sports Tourer R21 lakh

* BMW 1-Series Rs.20 lakh