India’s tryst with luxury is not new. It started centuries ago with the royals and the nobles indulging themselves in all means of ostentatious comforts of life. From building elaborate palaces to clothes to gastronomies to mechanics, everything was steeped in luxury and finesse. Hence, luxury isn’t something that the Indians are unaware of.
However, what has changed is that today luxury is not just limited to the royalty. In the past two decades, globalisation and an open economy have meant an increase in the per capita income, apart from an increase in understanding of trends being followed the world over. The internet boom and access across the country through computers and smartphones is taking global happenings to people on a real-time basis. This has given rise to aspirations of a growing affluent middle-class society who have easy access to information and also accessibility to luxury brands.
According to a KPMG report, the Indian luxury market grew at a rate of 30% in 2013 to reach $8.5 billion. It also suggests that the growth is likely to continue and reach $14 billion by the year 2016.
India, of course, has most of the biggest global luxury brands in the country already. You can shop at stores of best of luxury brands of the world in India. You can travel around in the best of luxurious cars such as Audi and stay at the most luxurious hotels. This aspirational aspect of the customers in the country bodes well for the luxury car market in India.
Luxury cars in India
We have seen the launch of a plethora of luxury car brand models over the last 2-3 years. In fact, such a thing was unheard of in the Indian car market even 7-8 years ago.
In 2013, the Indian luxury car market had total sales of 32,000 units with growth rate of 1.3%. Over the past three years, in spite of the difficult economic conditions, the luxury car market has been able to maintain a steady growth in contrast to the passenger car market, which struggled to keep up with the momentum. Together with encouraging signs from the economy in recent times, the luxury car market is definitely poised to grow in the coming years.
Factors for growth
It is not difficult to analyse the reasons for this growth in India and the optimism attached to it if we look at the way the number of high-net-worth individuals are growing in India. What’s also interesting in India is its young population. For Audi, India is still a young market, but it is a focus market and, putting in context, India is only the second country in Asia where it holds a number one position after China.
The average age of an Indian millionaire has come down to 35-40 years from the earlier average of 50 years. The Indian luxury car market has emerged as one of the youngest in the world with respect to the average age of the car buyer. An increasing number of young entrepreneurs and professionals from various fields are buying luxury cars and have played a critical role in keeping the average age of the luxury car consumer to around 35 years. Globally, it is 43-45 years. This particular trend works to the benefit of the automakers to produce aspirational car models that younger buyers want to own and make a statement of personal success.
India has been positioned strongly on the importance map of luxury car companies and is now an intrinsic part of their global strategies. From massive investments to setting up their manufacturing base in the country, global companies are wooing India with an overdrive, while also exploring its option as an export hub. It is anything but prudent to say that India and luxury cars are going to become synonymous in the years ahead.
By Joe King
The author is head, Audi India